The long?run effect on the earnings per share of the merged firm depends largely on
A) the ratio of exchange.
B) the synergy of the merged firm.
C) the pre-merger P/E ratio.
D) the tax considerations.

Question

Quizplus · Accepted Answer

The synergy of the merged firm, which refers to the potential financial benefits that result from the combination of two companies, can have a significant impact on the long-run earnings per share of the merged firm. A successful merger that generates significant synergy can lead to increased earnings per share, while a poorly executed one can result in lower earnings per share. The ratio of exchange, pre-merger P/E ratio, and tax considerations may also play a role, but they are not as significant as the synergy effect.

The Long?run Effect on the Earnings Per Share of the Merged