Assume That Company a Makes a $40-Per-Share Offer for Company

question 10

Multiple Choice

Assume that Company A makes a $40-per-share offer for Company B, which now trades at $30 per share. Also assume that the deal is expected to close in 90 days. If the deal closes, then the risk arbitrager's return would be:

• A) 20%
• B) 30%
• C) 35%
• D) 50%

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Definitions:

Production Cost

The total expenditure incurred in the manufacturing of a product, including materials, labor, and overhead expenses, significant for pricing and profitability analysis.

Lower Cost

The reduction in expenses or outlay required to produce goods or services, often pursued to achieve competitive pricing.

Postponement

A strategy that involves delaying production or shipment processes to closer match demand, enhancing flexibility and reducing inventory costs.

Profits Increase

The rise in net earnings resulting from operations and business activities.