Suppose That the Market Price of Company a Is $50

question 65

Multiple Choice

Suppose that the market price of Company A is $50 per share and that of Company B is
$20) If A offers half a share of common stock for each share of B, the ratio of exchange of market prices would be:

• A) 0.8
• B) 1.25
• C) 0.4
• D) none of the above ratio = 25/20 = 1.25

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Definitions:

Segment Margin

The profit generated by a particular segment of a business, after deducting direct and allocated expenses specific to the segment.

Segmented Income Statement

A financial statement that breaks down revenues, costs, and profits for different parts of an organization, such as departments or product lines.

Contribution Format

An income statement format that separates variable costs from fixed costs, highlighting the contribution margin of sales over variable costs.

Consumer Segment

A specific group of customers targeted based on similar needs, preferences, or demographic profiles.