Both fiRms Are 100% Equity-fiNanced

question 237

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 value of the post-merger firm following a cash acquisition?

• A) $255,000
• B) $262,500
• C) $337,500
• D) $650,000
• E) $672,525

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Definitions:

Bulbourethral Glands

Two small glands, one on each side of the prostate gland, terminating in the urethra by way of a duct.

Cowper's

Glands, also known as bulbourethral glands, which produce a pre-ejaculate fluid in males.

Spermicide

A substance used to kill sperm, serving as a method of contraception.

Condom

A barrier device commonly used during sexual intercourse to reduce the risk of sexually transmitted infections (STIs) and as a form of birth control.