Firms a and B, Both All-Equity Financed, Are Merging

question 65

Multiple Choice

Firms A and B, both all-equity financed, are merging. Prior to merge, Firm A, having 100 shares outstanding, is worth $15,000 while Firm B, with 50 shares outstanding. The combined firm will be worth $30,000. Firm A pays $11,500 in cash for Firm B. What is the net benefit of the merger to Firm A?

• A) $3,500
• B) $5,000
• C) $11,500
• D) $18,500

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Definitions:

NADH

A coenzyme involved in redox reactions, carrying electrons from one reaction to another.

Gastrointestinal Tract

The pathway from the mouth to the anus, through which food enters the body and solid wastes are expelled.

Cellular Respiration

The set of metabolic reactions and processes that take place in the cells of organisms to convert biochemical energy from nutrients into ATP, and then release waste products.

Nucleus

A membrane-bound organelle found in eukaryotic cells that contains most of the cell's genetic material.