If an acquisition does not create value, then the:
A)earnings per share of the acquiring ﬁrm must be the same both before and after the
Acquisition.
B)earnings per share can change but the equity price of the acquiring ﬁrm should remain
Constant.
C)price per share of the acquiring ﬁrm should increase because of the growth of the ﬁrm.
D)earnings per share will most likely increase while the price-earnings ratio remains
Constant.
E)price-earnings ratio should remain constant regardless of any changes in the earnings per
Share.

Question

Quizplus · Accepted Answer

If an acquisition does not create value, the earnings per share can still change due to the additional shares issued for the acquisition. However, the equity price of the acquiring firm should remain constant as the market recognizes the inability of the acquisition to create additional value.

If an Acquisition Does Not Create Value, Then The