Companies a and B Are Valued as Follows

question 12

Multiple Choice

Companies A and B are valued as follows:

Company A now acquires B by offering one (new) share of A for every two shares of B (that is, after the merger, there are 2,500 shares of A outstanding) . Suppose that the merger really does increase the value of the combined firms by $20,000. . What is the cost of the merger?

• A)zero
• B)$2,000
• C)$8,000
• D)$4,000

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Definitions:

TRIN Ratio

Also known as the Arms Index, this technical analysis indicator compares the number of advancing and declining stocks to the volume of advancing and declining stocks, used to gauge overall market sentiment.

Bearish Signal

An indication in financial markets that the price of an asset is expected to decline.

Overweighting

Refers to the practice of allocating a larger percentage of a portfolio to a particular asset or sector than the benchmark or average portfolio.

Recent Performance

Refers to the latest outcomes or results of an investment's or financial instrument's activity over a short-term period.