Both fiRms Are 100% Equity-fiNanced

question 266

Multiple Choice

Both firms are 100% equity-financed. Firm A can acquire firm B for $82,500 in the form of either cash or stock. The synergy value of the deal is $12,500. What is the price per share of the post-merger firm following a cash acquisition?

• A) $25.38
• B) $25.50
• C) $25.62
• D) $25.76
• E) $27.30

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Definitions:

Disinhibit

To stimulate a response that has been suppressed (inhibited) by showing a model engaging in that response without aversive consequences.

Categorical Self

The stage of self-awareness in which infants and toddlers begin to understand and categorize themselves in terms of visible characteristics such as age and gender, usually developing around 18-24 months.

Preschool Period

The developmental period in early childhood that spans from ages 3 to 5, just before entering formal school.

Darkness

The absence of light in a particular area or environment, often associated with night or shadow.