If the P/E paid is equal to the P/E of the acquiring company, the effect on the earnings per share of the acquired company will be
A) negative.
B) positive.
C) neutral.
D) uncorrelated.

Question

Quizplus · Accepted Answer

If the P/E paid is equal to the P/E of the acquiring company, then this means that the price paid per share of the acquired company is equal to the earnings per share of the acquiring company. This will not have any significant impact on the earnings per share of the acquired company, hence it will be neutral.

If the P/E Paid Is Equal to the P/E of the Acquiring