Consider Two Firms,Left Company and Right Enterprises,both with Earnings of $2.50

Multiple Choice

Consider two firms,Left Company and Right Enterprises,both with earnings of $2.50 per share and 15 million shares outstanding.Left is a mature company with few growth opportunities and a stock price of $7 per share.Right is a new firm with much higher growth opportunities and a stock price of $16 per share.Assume Right acquires Left using its own stock and the takeover adds no value.What is the change in Right's price-earnings ratio as a result of the acquisition?

A) 0
B) 3.0
C) -3.2
D) -3.6
E) -1.8