The Value of a Target Firm to the Acquiring Firm

question 49

Multiple Choice

The value of a target firm to the acquiring firm is equal to the:

• A)value of the target firm as a separate entity plus the synergy derived from the acquisition.
• B)purchase cost of the target firm.
• C)value of the merged firm minus the value of the target firm as a separate entity.
• D)purchase cost plus the incremental value derived from the acquisition.
• E)incremental value derived from the acquisition.

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Definitions:

Term To Maturity

The time remaining until a debt instrument, such as a bond or loan, is due to be repaid.

Strip Bond

A debt security that has had its periodic interest payments removed, trading only on the principal amount and offering a final payment at maturity.

Par Value

Par value is the nominal or face value of a bond, share, or coupon as stated by the issuer.

Coupon Payments

Regular interest payments made to bondholders over the life of a bond.