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If a firm acquires another firm with a higher P/E ratio:

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If a firm acquires another firm with a higher P/E ratio:

 Options:

A. postmerger earnings per share will be diluted
B. a cash acquisition is questionable
C. a stock-for-stock exchange should be pursued
D. none of the above are correct

 

The Correct Answer Is:

  • C. a stock-for-stock exchange should be pursued

 

Conclusion

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