The Following Data on a Merger Are Given

Multiple Choice

The following data on a merger are given:

Firm A has proposed to acquire Firm B at a price of $20 per share for Firm B's stock. Calculate the postmerger P/E ratio, assuming that cash is used in the acquisition and the merger has no immediate effect on total firm income.

A) 12.75
B) 6.25
C) 13.75
D) 17.85