When the ratio of exchange in a merger is equal to one and both the acquiring and the target companies have the same premerger earnings per share, the merged firm's earnings per share will initially
A) remain constant.
B) increase.
C) drop to zero.
D) decline.

Question

Quizplus · Accepted Answer

When the ratio of exchange is equal to one and both companies have the same premerger earnings per share, the merged firm's earnings per share will remain constant because there is no dilution or accretion of earnings. The combined earnings per share will be equal to the premerger earnings per share.

When the Ratio of Exchange in a Merger Is Equal