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Acquirer A has EPS Rs 20 and P/E 15; Target T has EPS Rs 12 and P/E 10. After all-stock acquisition with synergy zero, post-merger EPS of A:
ARises mechanically due to P/E asymmetry
BFalls due to P/E asymmetry
CRemains identical to pre-deal level
DBecomes mathematically indeterminate
Answer & Solution
Correct answer: A. Rises mechanically due to P/E asymmetry
1. Identify what the question asks: this concept maps to bootstrapearnings (§4.3).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (A).
_Source: ICAI BoS CA Final Paper 2, Ch 14 "Mergers Acquisitions and Corporate Restructuring"_
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