Which of the following is a common assumption made in an accretion/dilution analysis?

In an accretion/dilution analysis, a key assumption is often the estimation of cost and revenue synergies. This is because the analysis aims to assess the financial impact of an acquisition on the acquirer's earnings per share. Accretion occurs when the acquisition is expected to increase earnings per share, while dilution occurs when it decreases.

Cost and revenue synergies represent the potential benefits that arise from combining two businesses, leading to lower costs or higher revenues than the companies would achieve individually. By incorporating these synergies into the model, one can better estimate the true financial impact of the transaction, which is critical for investors and decision-makers.

Other assumptions, while relevant in different contexts, do not directly align with the core focus of the accretion/dilution analysis. For instance, stable market conditions and consistent share price growth may provide a background context but are not foundational assumptions of synergy estimates. Similarly, while acknowledging integration costs is vital for a comprehensive transaction assessment, the assumption often made for the purpose of a basic accretion/dilution analysis is that these costs can be outweighed or balanced by the anticipated synergies. Therefore, the focus on estimating synergies is central to making the analysis meaningful and actionable.