An increase in earnings per share after a merger may not indicate increased value if the:
A)Number of shares has increased
B)Price of the acquirer's stock increases
C)Price/earnings ratios were different in the pre-merger firms
D)Firm's additional earnings are spent on legal expenses of the merger

Question

Quizplus · Accepted Answer

An increase in EPS after a merger may not indicate increased value if the P/E ratios were different in the pre-merger firms, as the increase could be due to accounting changes rather than actual value creation.

An Increase in Earnings Per Share After a Merger May