The Bidding Firm (Firm B) Has 2,300 Premerger Shares Outstanding

question 75

Multiple Choice

The bidding firm (Firm B) has 2,300 premerger shares outstanding at $43 a share. The target firm (Firm T) has 1,100 premerger shares outstanding at $24 a share. Assume neither firm has any debt outstanding. Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $2,600. What is the NPV of the merger assuming that Firm T is willing to be acquired for $26 per share in cash?

• A) $400
• B) $100
• C) $800
• D) $2,200

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Definitions:

30 Years

Refers to a specific time duration, often notable as a period for long-term financial investments, bonds, or mortgages, signifying a significant milestone in various contexts.

Injurious Falsehood

A legal wrong involving the intentional making of untrue statements that harm another's business interests.

Good Faith

Honesty in fact; an honest intention to abstain from taking an unfair advantage of another.

Declaratory Judgment Action

A legal proceeding in which a court is asked to rule on the rights, duties, or obligations of one or more parties in a dispute before an actual injury has occurred.