Skip to main content
Next question. Company A is buying Company B. B has a P/E of 10. Company A has a P/E of 25, interest rate on debt of 8.3% and interest rate on cash of 4%. Tax rate 40%. The transaction is financed 1/3 each using stock, debt, and cash. Is it dilutive or accretive?

Company A is buying Company B. B has a P/E of 10. Company A has a P/E of 25, interest rate on debt of 8.3% and interest rate on cash of 4%. Tax rate 40%. The transaction is financed 1/3 each using stock, debt, and cash. Is it dilutive or accretive?

Start with the one-sentence answer an interviewer expects, then support it with the two or three drivers that actually move the number. Anchor every claim to a mechanism, not a memorized phrase.

Intuition

Interviewers are testing whether you can connect the concept to how the business actually earns and spends cash. Walk the logic in the order the money moves, and say what would change your answer.

Watch

The classic trap is reciting a definition and stopping. Strong candidates flag the edge cases, name the assumption they would sanity-check first, and keep units and signs consistent all the way through.

Deep Dive

Lay out the calculation step by step, state the inputs you would need, and finish by tying the result back to the original question so the interviewer hears a complete loop.