The Price at Which a Merger Target's Stock Is Acquired

question 39

Multiple Choice

The price at which a merger target's stock is acquired virtually always reflects a premium over its pre-merger market value because:

• A)the acquirer is trying to fairly divide the gain it will make on the acquisition between its own stockholders and the target's.
• B)it takes a substantial premium to get a large number of shareholders to sell at one time.
• C)the combined firm generally has an increased value because of additional leverage.
• D)the acquirer wants the target's shareholders to be happy about the merger because they will be among its shareholders after the transaction.

---

Definitions:

Negative Reinforcement

A behavioral concept where the removal of an unpleasant stimulus strengthens a particular behavior.

Positive Punishment

A form of behavior modification that adds an unfavorable outcome or event following an undesired behavior, with the intention of decreasing that behavior in the future.

Negative Punishment

The removal of a desirable stimulus to decrease a behavior.

Bandura

Albert Bandura is a psychologist known for his social learning theory, emphasizing the role of observational learning, self-efficacy, and reciprocal determinism in behavior.