Suppose You Have the Following Information Concerning an Acquiring fiRm

question 158

Multiple Choice

Suppose you have the following information concerning an acquiring firm (A) and a target firm (B) . Neither firm has any debt. The incremental value of the acquisition is estimated to be $250,000.
Firm B is willing to be acquired for $540,000 worth of Firm A's stock. What are the synergistic benefits that arise from the acquisition of Firm B?

• A) $138,000
• B) $250,000
• C) $405,000
• D) $655,000
• E) $920,000

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Definitions:

Sales Returns

Transactions in which customers return previously purchased merchandise to the seller for a refund, store credit, or exchange due to various reasons such as defects or dissatisfaction.

Income From Operations

The earnings of a business generated from its regular business operations, excluding revenues and expenses from non-operational activities.

Operating Expenses

Costs associated with the day-to-day functions of a business, excluding costs directly related to product manufacturing or service delivery.

Revenues

The total income earned by a company for selling its goods or services before any costs or expenses are deducted.