a. What will the earnings per share, EPS, of Firm A be after the merger? Intermediate b. What will Firm A's price per share be after the merger if the market incor- (continued) rectly analyzes this reported earnings growth (that is, the price-earnings ratio does not change)?

c. What will the price-earnings ratio of the postmerger firm be if the market correctly analyzes the transaction?

d. If there are no synergy gains, what will the share price of A be after the merger? What will the price-earnings ratio be? What does your answer for the share price tell you about the amount A bid for B? Was it too high? Too low? Explain.

12. Merger NPV Show that the NPV of a merger can be expressed as the value of the synergistic benefits, Ay, less the merger premium.

13. Calculating NPV Foxy News, Inc., is considering making an offer to pur- Challenge chase Pulitzer Publications. The vice president of finance has collected the fol- (Question 13) lowing information:

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