Sol Company Has Announced Plans to Acquire Luna Corporation

question 58

Multiple Choice

Sol Company has announced plans to acquire Luna Corporation.Sol is trading for $210 per share,and has a premerger value of $22 billion,while Luna is trading for $145 per share and has a premerger value of $14 billion.The projected synergies from the merger are $1 billion.If the offer is for $8 billion in cash and the remainder in stock,what is the maximum exchange ratio that Sol could offer in the stock swap portion and still generate a positive NPV?

• A)0.81
• B)0.74
• C)0.72
• D)1.69
• E)1.55

---

Definitions:

Latent Content

The hidden psychological meaning of a dream, as opposed to its literal storyline, according to Freudian psychology.

Family Obligations

Duties or responsibilities that individuals have towards their family members, often culturally or socially defined.

Manifest Content

In psychoanalytic theory, the remembered story line of a dream as opposed to the hidden meaning or latent content.

Night Terrors

A sleep disorder causing feelings of terror or dread, typically occurring during the first hours of stage 3-4 non-REM sleep, leading to gasping, screaming, or confusion upon waking.