Which one of the following statements is correct? Answer An increase in the earn

Question

Which one of the following statements is correct?
Answer
An increase in the earnings per share as a result of an acquisition will increase the price per share of the acquiring firm.
The price-earnings ratio will remain constant as a result of an acquisition which fails to create value.
If firm A acquires firm B then the number of shares in AB will equal the number of shares of A plus the number of shares of B.
If no value is created when firm A acquires firm B, then the total value of AB will equal the value of A plus the value of B.
Diversification is one of the greatest benefits derived from an acquisition.

Explanation / Answer

If no value is created when firm A acquires firm B, then the total value of AB will equal the value of A plus the value of B.

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