What Is the Cost of Acquiring a If the V

question 45

Multiple Choice

What is the cost of acquiring A if the V and A merge? V is worth $450 and has 100 shares outstanding. A has a market value of $375 and has 40 shares outstanding. V to acquire A will swap 80 shares of V for the 40 shares of A. V believes the combination of VA was worth $925.

• A) $325
• B) $100
• C) $36
• D) $0

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Definitions:

EBIT

Earnings Before Interest and Taxes, a financial metric that calculates a company's profitability from operations without the effects of interest and tax expenses.

Cash Coverage Ratio

A financial metric that measures a company's ability to cover its debt obligations with its cash and cash equivalents.

Equity Multiplier

A financial leverage ratio that measures the portion of a firm's assets that are financed by shareholders' equity.

Du Pont Identity Method

A technique for analyzing a company's financial performance by examining its efficiency, leverage, and profit margins.