Consider the Following Premerger Information About a Bidding Firm (Buyitall

question 28

Multiple Choice

Consider the following premerger information about a bidding firm (Buyitall Inc. ) and a target firm (Tarjay Corp. ) .Assume that neither firm has any debt outstanding.Buyitall has estimated that the present value of any enhancements that Buyitall expects from acquiring Tarjay is $2,600.What is the NPV of the merger assuming that Tarjay is willing to be acquired for $28 per share in cash?
$\begin{array}{c}\begin{array}{lll}\\\text { Shares outstanding}\\\text { Price per share}\\ \hline\end{array}\begin{array}{lll}\text { Buyitall}\\ \hline 1,500\\ \$ 32 \\ \hline\end{array}\begin{array}{lll}\text {Tarjay}\\\hline1,100\\ \$ 26 \\\hline\end{array}\end{array}$

• A) $400
• B) $600
• C) $1,800
• D) $2,200
• E) $2,600

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Definitions:

Debtor

A person or entity that owes money to another individual or entity, often as a result of borrowing.

UCC's Classification

A system of categorizing and standardizing commercial transactions and instruments, established under the Uniform Commercial Code.

Perfect

Complete and absolute, often used in legal contexts to describe a state in which rights or securities are fully enforceable.

Security Interest

A legal claim or right granted by a borrower to a lender over the borrower's assets as collateral for a loan.