Companies a and B Are Valued as Follows

Multiple Choice

Companies A and B are valued as follows:

Company A now acquires B by offering one (new) share of A for every two shares of B (that is, after the merger, there are 2,500 shares of A outstanding) . If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger?

A) 7.5
B) 8.3
C) 10
D) 5