If an Acquisition Does Not Create Value, Then The

question 70

Multiple Choice

If an acquisition does not create value, then the:

• A) Earnings per share of the acquiring firm must be the same both before and after the acquisition.
• B) Earnings per share can change but the stock price of the acquiring firm should remain constant.
• C) Price per share of the acquiring firm should increase because of the growth of the firm.
• D) Earnings per share will most likely increase while the price-earnings ratio remains constant.
• E) Price-earnings ratio should remain constant regardless of any changes in the earnings per share.

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Definitions:

Hooke's Law

A principle stating that the force needed to extend or compress a spring by some distance is proportional to that distance.

Average Speed

The total distance traveled divided by the total time taken, reflecting a constant rate of movement over a specific interval.

Constant of Proportionality

A constant ratio or factor that relates two variables in a proportional relationship, often represented by k in the formula y = kx.

Square Root

A value that, when multiplied by itself, gives the original number.