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

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Definitions:

Higher Inflation

An economic condition characterized by a significant and rapid increase in the general price level of goods and services in an economy over a period of time.

Tax Cuts

Reductions in the amount of taxes imposed by the government on individuals or businesses.

Aggregate Supply

The total supply of goods and services that firms in an economy plan on selling during a specific time period.

Fiscal Programs

Government initiatives that involve expenditure and taxation decisions to influence the national economy.