A successful merger requires that the:A) P/E ratio maintains its pre-merger value.B) Debt-equity ratio of the firm remains at its pre-merger level.C) Book value per share must remain constant.D) Book value per share must increase.E) Value of the whole exceeds the value of the sum of the parts.

Question

A successful merger requires that the:A)  P/E ratio maintains its pre-merger value.B)  Debt-equity ratio of the firm remains at its pre-merger level.C)  Book value per share must remain constant.D)  Book value per share must increase.E)  Value of the whole exceeds the value of the sum of the parts.

Freddy Reeves · Accepted Answer

Final Answer : E, Explanation :  The primary goal of a merger is to create synergy, where the combined value and performance of the two companies are greater than the sum of the separate individual parts. This concept is encapsulated in choice E, indicating that the value of the whole (post-merger entity) should exceed the value of the sum of its parts (the two separate entities before the merger).

A successful merger requires that the:

A) P/E ratio maintains its pre-merger value.
B) Debt-equity ratio of the firm remains at its pre-merger level.
C) Book value per share must remain constant.
D) Book value per share must increase.
E) Value of the whole exceeds the value of the sum of the parts.

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Learning Objectives

Learning Objectives

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