Answer the following statements true (T) or false (F)
1. The ratio of exchange in market price indicates the market price per share of an acquiring firm paid for each dollar of market price per share of the target firm.
2. The actual ratio of exchange in a stock-exchange acquisition is the ratio of the amount paid per share of the target company to the per-share market price of the acquiring firm.
3. The earnings per share of a merged firm are generally above the premerger earnings per share of one firm and below the premerger earnings per share of the other, after making the necessary adjustment for the ratio of exchange.
4. If the P/E paid is greater than the P/E of the acquiring company, on a postmerger basis the target firm's EPS increases and the acquiring firm's EPS decreases.
5. A method of acquisition in which the acquiring firm exchanges its shares of stock for shares of the target company according to a predetermined ratio is called a stock swap transaction.
1. TRUE
2. TRUE
3. TRUE
4. TRUE
5. TRUE
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