Sol Company Has Announced Plans to Acquire Luna Corporation at a Premium

question 67

Multiple Choice

Sol Company has announced plans to acquire Luna Corporation at a premium of 30% over the pre-announcement share price.Sol is trading for $19 per share,and has a premerger value of $37 billion.Prior to the announcement,Luna was trading for $12 per share,and currently has 192 million shares outstanding.The projected synergies from the merger are $2 billion.What is the maximum exchange ratio that Sol could offer in a stock swap transaction and still generate a positive NPV?

• A)2.03
• B)1.37
• C)1.54
• D)1.05
• E)1.18

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Definitions:

Unspecified Extra Costs

Additional expenses that were not originally planned or accounted for in a project's budget, often arising from unforeseen circumstances or changes.

Estimate to Complete

An updated projection of costs still required to complete all remaining project activities, considering current performance.

Budget at Completion

The total budget allocated for a project based on all estimated costs upon completion.

Schedule Variance

A project management metric indicating the difference between the planned and actual progress of a project.