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

question 63

True/False

If the P/E paid is greater than the P/E of the acquiring company, on a postmerger basis the target firm's EPS increases and the acquiring firm's EPS decreases.

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Definitions:

One-tailed Test

A statistical hypothesis test in which the region of rejection is on only one side of the sampling distribution.

α

Symbol often used to represent the level of significance in hypothesis testing, typically denoting the probability of making a Type I error.

Null Hypothesis

A statement or hypothesis that assumes there is no significant difference or effect, serving as the basis for statistical testing.

Level of Significance

The threshold chosen for determining whether a statistical result is significant in hypothesis testing, typically set at values like 0.05, 0.01, etc.