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An accretive/dilutive question given ROE of one firm and P/E ratio of the other
Just got this one from interview: Listed companies A and B, A has an ROE of 9%, B has a P/E ratio of 10x. Now A acquires B in all-stock, is this deal Accretive or dilutive? Follow-up: What if A does it in all-cash? What if A is a private company? I only know in an all-stock deal, if A has a...
How would amortization of intangibles make an acquisition dilutive?
I understand that logically, if intangible assets are amortized, then the company is going to take a hit to the income statement. But this doesn't happen right away, right? I mean, the company would have to re-asses its assets (like Ebay/Skype) and then do a goodwill impairment. So how does...
An accretive/dilutive question with a twist
Supposed a company is being traded at 10 times its earnings. It is trying to sell a part of its business that is being traded at 20 times its earnings. Will this be an accretive or dilutive deal? I said accretive because after the sale, you are left with cheaper part of the business = lower PE ratio...
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