It is possible to merge with a company which results in the same earnings per share but still lowers the new firm's cost of capital.

Question

Quizplus · Accepted Answer

This is possible due to the concept of beta, which measures the risk of an investment compared to the overall market. If the merged company has a lower beta than the individual companies, it could result in a lower cost of capital even if earnings per share remain the same.

It Is Possible to Merge with a Company Which Results