If the P/E paid is greater than 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

The higher P/E paid by the acquiring company indicates that the market values the acquired company's earnings more highly than the acquiring company's earnings. This will result in a positive effect on the earnings per share of the acquired company.

If the P/E Paid Is Greater Than the P/E of the Acquiring