CBA CorpIs Worth $15 Million as a Stand-Alone Firm

question 14

Multiple Choice

CBA Corp.is worth $15 million as a stand-alone firm.ABC Corp.has offered 350,000 shares valued at $50 each to acquire CBA.After the announcement,however,the price of ABC's shares falls to $45.What was the cost of the merger?

• A) −$1.75 million
• B) $0.75 million
• C) $1.75 million
• D) $3.25 million

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Definitions:

Salvage Value

The expected salvage value of an asset after it has served its useful life.

Service Life

The expected period during which an asset remains usable, functional, or productive before it requires replacement or major repair.

Capitalize Interest

The process of adding the cost of interest on a loan to the balance of the loan instead of paying it out.

Accumulated Expenditures

The total amount of money spent on a project or investment over a period of time, often related to capital projects.