An Acquiring Company Is Considering a Takeover of a Target

question 72

Multiple Choice

An acquiring company is considering a takeover of a target company.The acquiring company has 10 million shares outstanding with $40 per share.The target company has 5 million shares outstanding which sell for $20 per share.If the acquiring company estimates that merger gains will be $20 million, determine what the highest price will be paid per share for the target.

• A)$24
• B)$26
• C)$28
• D)$30

---

Definitions:

Operating Assets

Assets that are used for the day-to-day functioning of a business and can include cash, inventory, and buildings.

Direct Fixed Costs

Costs that are constant for a certain level of production or period but are directly tied to the production process.

Profit Center Manager

A manager responsible for overseeing a business segment or department that is judged on its ability to generate profit.

Budgetary Control

The process of comparing actual financial performance with the budgeted amounts and analyzing the differences to make informed business decisions.