Company A (P/E 10x, 100 shares at $100) acquires Company B (P/E 15x, 100 shares at $30) in an all-stock deal. (a) Is it accretive or dilutive, and by how much? (b) What would make it more accretive? (c) How much additional pre-tax income would make it break even, at a 20% tax rate?

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(a) Accretive or dilutive. 7%.

Company A (P/E 10x, 100 shares at $100) acquires Company B (P/E 15x, 100 shares at $30) in an all-stock deal. (a) Is it accretive or dilutive, and by how much? (b) What would make it more accretive? (c) How much additional pre-tax income would make it break even, at a 20% tax rate?

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