Assume Firm A acquires Firm B.As a result,the EPS of Firm A increase by 10 percent.Given this increase,you know for certain that the
A)acquisition created synergy.
B)purchase price was below market value.
C)value of B to A exceeded the value of B as a stand-alone firm.
D)acquisition provided diversification benefits.
E)total earnings divided by the total shares increased.

Question

Quizplus · Accepted Answer

The increase in EPS (Earnings Per Share) indicates that the total earnings divided by the total shares outstanding increased post-acquisition, which directly explains why the EPS would rise. This does not necessarily imply synergy, a below-market purchase price, a specific valuation comparison, or diversification benefits without additional context.

Assume Firm a Acquires Firm B