Consider the Following Premerger Information About a Bidding Firm (Firm

question 46

Multiple Choice

Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T) .Assume that neither firm has any debt outstanding. $$\begin{array} { l r r } & \underline { \text { Firm B } } & \underline { \text { Firm T } } \\\text { Shares outstanding } & 1,700 & 1,200 \\\text { Price per share } & \$ 32 & \$ 26\end{array}$$ Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $2,500.What is the NPV of the merger assuming that Firm T is willing to be acquired for $28 per share in cash?

• A)$100
• B)$400
• C)$1,800
• D)$2,200
• E)$2,600

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Definitions:

External Validity

The extent to which the results of a study can be generalized to other situations, populations, or time periods beyond the study itself.

Diffusion

In experimental design, the problem of a treatment effect spreading from group to group as people communicate.

Treatment Effect

The difference in outcomes between a group receiving an intervention and a control group in an experimental study.

Factorial Designs

Experimental designs that manipulate two or more variables at a time.