If an Acquisition Does Not Create Value, Then The

question 81

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 equity 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.

---

Definitions:

Marginal Analysis

Marginal analysis evaluates the impact of a slight change in production or consumption, used to make decisions about allocating resources most efficiently.

Risk Aversion

The tendency of individuals or entities to prefer outcomes with less uncertainty, avoiding risks in decision-making.

Economic Payoff

The financial return or profit resulting from an investment or action.

Bounded Rationality

The concept that when individuals make decisions, their rationality is limited by the information they have, the cognitive limitations of their minds, and the time available to make the decision.