Sol Company Has Announced Plans to Acquire Luna Corporation

question 58

Multiple Choice

Sol Company has announced plans to acquire Luna Corporation.Sol is trading for $210 per share,and has a premerger value of $22 billion,while Luna is trading for $145 per share and has a premerger value of $14 billion.The projected synergies from the merger are $1 billion.If the offer is for $8 billion in cash and the remainder in stock,what is the maximum exchange ratio that Sol could offer in the stock swap portion and still generate a positive NPV?

• A)0.81
• B)0.74
• C)0.72
• D)1.69
• E)1.55

---

Definitions:

Full-scale War

Full-scale war involves extensive military engagement between nations or large groups, utilizing the full capacity of available weapons and resources.

Union

An organization formed by workers in various sectors to protect and advance their rights, wages, and working conditions.

Closed Shop

A workplace where only members of a particular union are hired and where being a member of the union is a condition for employment.

Agency Shop

is a workplace where employees are not required to join the union, but must still pay union dues as the union negotiates on behalf of all employees.