Sol Company Has Announced Plans to Acquire Luna Corporation

question 44

Multiple Choice

Sol Company has announced plans to acquire Luna Corporation.Sol is trading for $23 per share,and has a premerger value of $7 billion,while Luna is trading for $56 per share and has a premerger value of $5 billion.The projected synergies from the merger are $500 million.If the offer is for $2 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)3.04
• B)2.68
• C)2.84
• D)0.48
• E)0.45

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