Assume the Following Data If Firm a Intends to Pay $7 Million Cash for }

question 34

Multiple Choice

Assume the following data: $$\begin{array} { l c c c } & \text { Firm A } & \text { Firm B } & \text { Firm AB (after merger of } A \text { and B) } \\\text { Market Price per share } & \$ 20 & \$ 10 & \\\text { Number of shares } & 1,000,000 & 500,000 & \\\text { Market value of the firm } & \$ 20 \text { million } & \$ 5 \text { million } & \$ 30 \text { million }\end{array}$$
If Firm A intends to pay $7 million cash for Firm B,then calculate the cost of this merger.

• A)$2 million
• B)$3 million
• C)$1 million
• D)zero

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Definitions:

Confidential Information

Sensitive information that is not public knowledge and is protected from unauthorized disclosure, often within a business or professional context.

Tipper

An insider who gives inside information to someone.

Tippee

An individual who receives confidential information from an insider.

Publicly Traded

Refers to a company whose shares are available for purchase by the general public on a stock exchange.