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:

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price in a particular period.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, expressed as a percentage.

Electricity Consumption

The amount of electrical energy used by households, businesses, and industries over a certain period, typically measured in kilowatt-hours (kWh).

Price Elasticity

A gauge of the extent to which the demand for a certain item is affected by fluctuations in its cost.