Accretion / dilution calculator

What accretion / dilution actually means

A deal is accretive if the acquirer's pro forma EPS is higher than its standalone EPS, and dilutive if it's lower. Two things move the needle: the target's earnings coming in (helps), and what it costs to buy them — new shares issued for the stock portion (spreads earnings over more shares) plus the after-tax interest cost of the cash/debt portion (reduces net income). This calculator is deliberately simplified: no synergies, no intangible amortization or other purchase accounting, and no foregone interest on balance-sheet cash.

How to use this in an interview

• Lead with the shortcut: in an all-stock deal, compare P/E ratios — if the acquirer's P/E is higher than the price paid for the target's earnings, the deal is accretive. Try it above: at a $6,000M price for $300M of net income (20.0x) against an acquirer at 20.0x ($40 ÷ $2.00), a 100% stock deal is exactly breakeven.
• For cash deals, compare the target's earnings yield (target NI ÷ price) to the after-tax cost of the cash: 5% × (1 − 25%) = 3.75% here, versus a 5% earnings yield — so the all-cash version is accretive.
• Common follow-ups: Why can an accretive deal still destroy value (EPS math ignores price paid vs. intrinsic value)? What makes a deal more dilutive (higher premium, more expensive financing, low target earnings)? How do synergies or intangible amortization change the answer?