A Competent Merger Analysis Calculates the Maximum Per Share Price

question 14

Multiple Choice

A competent merger analysis calculates the maximum per share price that should be paid for an acquisition as:

• A)the pre-merger market price plus the per share value of synergies.
• B)the NPV of the incremental cash flows coming from the acquisition divided by the number of shares of the target's stock that are outstanding.
• C)the targets terminal value.
• D)the NPV of the target's terminal value divided by the number of share tendered.

Understand the concept of overhead allocation using traditional costing methods.

Calculate predetermined overhead rates under traditional costing systems.

Apply overhead based on direct labor hours in traditional costing to determine unit costs.

Understand and apply material handling costs allocation based on different bases (direct labor-hours, material moves).

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Definitions:

Actual Rate

The real interest rate or exchange rate that is applied in current transactions, distinct from theoretical or future rates.

Standard Rate

A predetermined cost or price used in budgeting and costing exercises, reflecting an expected or agreed level of expenditure or charge.

Variable Factory Overhead Controllable Variance

The difference between the actual and budgeted variable overhead costs that management has the ability to influence or control.

Actual Hours

The real number of hours worked or spent on a particular activity or project, as opposed to planned or estimated hours.