Firm a Has a Value of $100 Million and Firm

question 72

Multiple Choice

Firm A has a value of $100 million and Firm B has a value of $60 million. Merging the two would enable cost savings with a present value of $20 million. Firm A purchases Firm B for $65 million. How much do Firm A's shareholders gain from this merger?

• A)$30 million
• B)$20 million
• C)$15 million
• D)$5 million

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Definitions:

Validity

The degree to which an assessment accurately measures its purported content.

Reliability

The degree to which an assessment tool produces stable and consistent results.

Validity

The extent to which a test measures what it claims to measure.

Internal Consistency

A measure of reliability assessing the degree to which different test items that propose to measure the same general construct produce similar results.