If Firm a Acquires Firm B and Firm B's Shareholders

question 41

Multiple Choice

If Firm A acquires Firm B and Firm B's shareholders are given the fraction x of the combined firm, then the cost of this merger is

• A)Cost = (PVAB) - (x) PVB.
• B)Cost = (x) PVAB - PVB.
• C)Cost = PVAB - (x) PVA.
• D)Cost = (x) PVAB - (x) PVB.

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Definitions:

Duty Delegated

The assignment of responsibilities or tasks by someone in authority to another person or entity.

Privity of Contract

A doctrine in contract law that stipulates that only parties involved in the contract have the rights and responsibilities to enforce it.

Contract Rights

The legal benefits and obligations that are created by a contract for the parties involved.

Incidental Benefit

A non-intended advantage or favor a party receives from a contract made between other parties.