Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Question
Chapter 20, Problem 7DQ
Summary Introduction
To explain: The possibility that the post-merger P/E will move in the direction opposite to the immediate post-merger earning per share.
Introduction:
Earnings per share (EPS):
It is the profit per outstanding share of a public company. A higher EPS indicates a higher value of the company because investors are ready to pay a higher price for one share of the company.
P/E ratio:
It is calculated by dividing the current share price of a company by its EPS. It helps in valuing the present as well as future profitability of a company.
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