If an Acquisition Does Not Create Value and the Market

question 24

Multiple Choice

If an acquisition does not create value and the market is smart, 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.