When Firm a Acquired Firm B, No Incremental Value Was

question 82

Multiple Choice

When Firm A acquired Firm B, no incremental value was created but earnings per share increased. If the financial markets are astute, the price-earnings ratio of Firm A should ____ and the stock price of Firm A should _____.

• A) decrease; decrease
• B) decrease; increase
• C) decrease; remain constant
• D) increase; decrease
• E) increase; increase

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Definitions:

Technologies

The application of scientific knowledge for practical purposes, especially in industry, where it involves the design and creation of tools, machines, systems, or processes.

Intangible Benefits

Advantages derived from a product or service that cannot be physically touched or quantified, such as customer service quality or brand reputation.

Physically Touched

In a marketing context, refers to the consumer's physical interaction or experience with a product.

Market Segmentation

The practice of dividing a market into distinct groups of buyers with different needs, characteristics, or behaviors who might require separate products or marketing mixes.