Series 79 practice questioneasyFinancial Modeling
Which statement about accretion/dilution modeling is correct?
- AIt measures how a proposed acquisition changes the buyer’s earnings per share relative to standalone EPS✓ Correct answer
- BIt measures whether enterprise value exceeds equity value
- CIt calculates the tax basis of target assets only
- DIt determines whether a rights offering must be registered
Explanation
Why A — It measures how a proposed acquisition changes the buyer’s earnings per share relative to standalone EPS
It measures how a proposed acquisition changes the buyer’s earnings per share relative to standalone EPS Accretion/dilution analysis is an EPS impact test performed from the buyer’s perspective. It is especially important in public company stock-for-stock or mixed-consideration transactions.
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