A Merger Is Expected to Produce Cost Savings of $50

question 58

Multiple Choice

A merger is expected to produce cost savings of $50 million and the acquired firm's shareholders will receive a premium of 20% over the $150 million value of their firm.The gain of the merger to the acquirer is:

• A)$20 million
• B)$30 million
• C)$50 million
• D)$130 million Gain_A = gain from merger less premium given to shareholders of B
• = $50 million - $30 million

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Definitions:

Drawer

In banking and finance, the person who writes or issues a check or draft instructing the bank to pay a specified amount of money to a designated party.

Drawee

The party in a financial transaction who is directed to pay a certain sum of money as per the payer's instructions.

Stop Payment Order

A request made to a financial institution to cancel the payment or processing of a check or payment transaction before it has been completed.

90 Days

A period of time consisting of exactly ninety days, often used in reference to deadlines or waiting periods.