ABC CorpHas Offered One Million Shares Having a Total Market Value

question 52

Multiple Choice

ABC Corp.has offered one million shares having a total market value of $8 million for XYZ Corp.After the merger is announced, shares in ABC trade for $7 each.If ABC is confident about XYZ's value, what has happened to the cost of the merger?

• A)It increases by $1 million
• B)It decreases by $1 million
• C)It increases by $9 million
• D)It remains constant Pre-Announcement:
• Cost of merger = Value of acquired firm
• = ($8 x 1 million) - value of acquired firm
• = $8 million - value of acquired firm
• Post-Announcement:
• Cost of merger = $7 million - value of acquired firm

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Definitions:

Outliers

Data points that significantly deviate from the other observations in a dataset, potentially indicating measurement error or an unusual event.

Statistical Procedure

A standard process or series of operations in statistics used for collecting, organizing, summarizing, and analyzing data to draw conclusions or make predictions.

Average Prices

The mean cost calculated by dividing the total sum of all prices by the number of prices in the dataset.

Supermarkets

Large retail market places typically offering a wide variety of goods including food, clothing, and household items.