bad way to think about this technical?
company A has $100 NI and 20 shares. Company B has $25 net income and 25 shares. Company A buys Company B for 15 P/E. Deal is 100% debt with 5% cost of debt. Is it accretive or dilutive?
Thought process was after tax cost of debt (assuming 40% tax rates) would be (1-.4)*.05=.03 compared to earnings yield of company b is 1/15=.056. Since earnings yield is higher than after tax cost of debt, the deal is accretive?
Know the aquirer has EPS of 5 and acquisition amount is 375 but don’t know what to do with that info… struggle a lot with these technical questions and need to get better at them.
Am I stupid?
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