Racing Motors Has a Market Value of $187,000

question 22

Multiple Choice

Racing Motors has a market value of $187,000.PJ Racing has 22,500 shares of stock outstanding at a price per share of $43.PJ Racing is acquiring Racing Motors in an exchange for 4,350 shares of PJ Racing stock.The merger is expected to create $21,000 of synergy.The postmerger value of the firm will be ________ and the postmerger price per share will be ________.

• A)$1,215,000; $43.78
• B)$1,865,500; $44.06
• C)$1,240,000; $42.89
• D)$1,040,000; $44.06
• E)$1,175,500; $43.78

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Definitions:

Contribution Format

is an income statement format that separates fixed and variable costs, highlighting the contribution margin.

Net Operating Income

The profit generated from a company's operational activities after subtracting operating expenses from revenue.

Target Profit

The amount of net income that a company aims to achieve within a specific time frame.

Margin of Safety Percentage

The ratio that shows how much sales can decline before a business reaches its break-even point, expressed as a percentage.