At the Beginning of the Year Ham Inc

question 4

Multiple Choice

At the beginning of the year Ham Inc.'s management is considering making an offer to buy Egg Corporation.Egg's projected operating income (EBIT) for the current year is $25.0 million,but Ham believes that if the two firms were merged,it could consolidate some operations,reduce Egg's expenses,and raise its EBIT to $39.0 million.Neither company uses any debt,and they both pay income taxes at a 40% rate.Ham has a better reputation among investors,who regard it as better managed and also less risky,so Ham's stock has a P/E ratio of 18 versus a P/E of 12 for Egg.Since Ham's management will be running the entire enterprise after a merger,investors will value the resulting corporation based on Ham's P/E.Based on expected market values,how much synergy should the merger create? Do not round your intermediate calculations.

• A) $301.50 million
• B) $277.38 million
• C) $241.2 million
• D) $205.02 million
• E) $229.14 million

Appreciate the role of creativity in the design, execution, and interpretation of psychological research.

Understand the concepts and components of the "American system" of economics.

Identify factors contributing to the development of a robust market economy in early 19th century America.

Comprehend the significance of competition in a free market economy.

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Definitions:

Internet

A global network of interconnected computers and servers that facilitates the exchange of data and communication.

Full Employment

A situation in an economy where all available labor resources are being used in the most efficient way possible, typically characterized by the absence of cyclical unemployment.

Unemployment

The situation where individuals who are capable of working and actively seeking employment are unable to find a job.

Labor Force

The total number of people employed and those actively seeking employment in an economy.