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) decline
B) remain constant
C) increase
D) drop to zero

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. This is because each shareholder's ownership percentage and earnings remain the same after the merger.

When the Ratio of Exchange in a Merger Is Equal