Companies a and B Are Valued as Follows Company a Now Acquires B by Offering One (New) Share

Multiple Choice

Companies A and B are valued as follows: $\begin{array} { l c c } & \mathrm { A } & \mathrm { B } \\\text { Number of shares } & 2,000 & 1,000 \\\text { Earnings per share } & \$ 10 & \$ 10 \\\text { Share price } & \$ 100 & \$ 50\end{array}$ 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