When the Ratio of Exchange in a Merger Is Equal

question 149

Multiple Choice

When the ratio of exchange in a merger is equal to one and both the acquiring and the target companies have the same premerger earnings per share, the merged firm's earnings per share will initially ________.

• A) decline
• B) remain constant
• C) increase
• D) drop to zero

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Definitions:

Intended Beneficiary

An individual or entity that is not a direct party to a contract but stands to benefit from its performance.

Rights

Legal, social, or ethical principles of freedom or entitlement.

Contract

A legally binding agreement between two or more parties that delineates the terms of their relationship and obligations to each other.

Vesting

The process by which an employee earns the right to receive full benefits from the employer's contribution to a pension plan or stock option plan over time.