Imagine that you are the Chief Executive Officer (CEO) for Bluecurity, a company that specializes in producing cell phones. Bluecuritys products are very popular, and the company has steady profits and cash inflows. The share price for Bluecurity is $26 per share.

(a) The expected earnings per share of Bluecurity is $1.2 per share. The CFO of Bluecurity told you that as long as Bluecurity acquires a target without synergy, the earnings per share of Bluecurity will still be $1.2 per share after the acquisition. Do you agree or disagree with the CFO?

(b) Suppose you plan to acquire Redcurity, and you just find that Redcurity had significant losses in previous years, which is allowed by the tax authority to carry forward. Other things equal, explain whether you will be more or less confident about choosing Redcurity as your target.

(c) Another company, Newcurity, plans to acquire Bluecurity. Suppose there is a substantial synergy in the combination of Newcurity and Bluecurity. After Newcurity announces acquiring Bluecurity, its share price does not change significantly. Discuss one reason why Newcuritys share price does not increase, given the substantial synergy.