New Tech Has a Market Value of $384,000

question 31

Multiple Choice

New Tech has a market value of $384,000.Emerson Electrics has 40,000 shares of stock outstanding at a price per share of $39.Emerson Electrics is acquiring New Tech in exchange for 10,000 shares of Emerson Electrics stock.The merger is expected to create $28,000 of synergy.What is the merger net present value?

• A)-$81,000
• B)-$10,400
• C)$22,400
• D)$17,600
• E)$46,400

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Definitions:

Risk Aversion

The tendency to prefer certainty over uncertainty, characterized by a preference for safe options over risky ones.

Certainty Effect

The psychological phenomenon where people tend to give greater weight to outcomes that are certain, compared to outcomes that are probable.

Liquidate Resources

Refers to the process of converting assets or resources into cash or cash equivalents by selling them in the market.

Risk Aversion

The tendency to avoid taking risks and prefer safer options.