The Shareholders of Firm a Have Offered One Million Shares

question 112

Multiple Choice

The shareholders of firm A have offered one million shares valued at $10 each to acquire firm B After the merger is announced, stock A trades for $9 per share.Which of the following statements is not correct?

• A)Firm A appears to have overbid for firm B
• B)The NPV of the merger may differ from expectations
• C)Shareholders of A absorb all additional "cost"
• D)A's stockholders are better off than if the merger were cash financed for $10 million

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Definitions:

Coverdell Education Savings Account

A tax-advantaged savings account designed to pay for education expenses, from elementary through higher education.

AGI Phaseout Rules

Guidelines that gradually reduce or eliminate certain deductions and credits as adjusted gross income (AGI) reaches specified levels.

Qualified Pension Plan

A retirement plan conforming to IRS requirements, offering tax advantages and benefits to employees.

Deducted Immediately

Expenses that can be subtracted from gross income in the year they are incurred, without capitalization or amortization.