If the P/E paid for a target company is equal to the P/E of the acquiring company, the effect on the earnings per share of the acquired company will be ________.
A) positive
B) neutral
C) negative
D) uncorrelated

Question

Quizplus · Accepted Answer

If the P/E paid for a target company is equal to the P/E of the acquiring company, the effect on the earnings per share of the acquired company will be neutral. This is because the acquiring company is valuing the target company based on the same multiples as their own, so there is no immediate change in the earnings per share of the acquired company.

If the P/E Paid for a Target Company Is Equal