Consider Two Firms,Big Company and Little Enterprises,both with Earnings of $6

Multiple Choice

Consider two firms,Big Company and Little Enterprises,both with earnings of $6 per share and 2 million shares outstanding.Big is a mature company with few growth opportunities and a stock price of $56 per share.Little is a new firm with much higher growth opportunities and a stock price of $72 per share.Assume Little acquires Big using its own stock and the takeover adds no value.What is the change in Little's price-earnings ratio as a result of the acquisition?

A) 0
B) 9.36
C) -4.70
D) -1.33
E) 1.25