Question：ST Inc makes a bid to acquire all the share capital of WV Inc, paying for the acquisition by means of a share exchange. The shares of ST Inc are currently trading on a P/E of 12.5 and the shares of WV Inc are trading on a P/E ratio of 15. No savings or increase in combined sales are expected as a result of the takeover.
Given no change in the annual profits after tax of either company, what will happen to the earnings per share of the combined ST group after the takeover?
A. EPS will remain the same.
B. EPS will go down.
C. It is impossible to assess, without figures for earnings and numbers of shares.
D. EPS will go up.
The correct answer is:EPS will go down.
When the bid consideration is all in shares and one company buys another on a higher P/E ratio, the EPS will fall after the takeover unless total profits can be increased after the takeover, perhaps through economies of scale or higher combined total sales. In this question, there are no such profit increases.
高顿网校温馨提醒
各位考生，2016年ACCA备考已经开始，为了方便各位学员能更加系统地掌握考试大纲的重点知识，帮助大家充分备考，体验实战，高顿网校开通了全免费的
ACCA题库（包括精题真题和全真模考系统），题库里附有详细的答案解析，学员可以通过多种题型加强练习。
戳这里进入ACCA免费题库>>>
写评论
