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Consider the following information about Firm A and Firm T: Item Firm A (Acquiring firm) Firm T (Target firm) Price per share   $20   $15 Outstanding shares   50   25 Total market value $1000.00 $375     Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the NPV of the acquisition to firm A? Select one: a. $1075.00 b. $575.00 c. $425.00 d. $555.00

Consider the following information about Firm A and Firm T: Item Firm A (Acquiring firm) Firm T (Target firm) Price per share   $20   $15 Outstanding shares   50   25 Total market value $1000.00 $375     Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the NPV of the acquisition to firm A? Select one: a. $1075.00 b. $575.00 c. $425.00 d. $555.00

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

Consider the following information about Firm A and Firm T:

Item

Firm A (Acquiring firm)

Firm T (Target firm)

Price per share

 

$20

 

$15

Outstanding shares

 

50

 

25

Total market value

$1000.00

$375

 

 

Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the NPV of the acquisition to firm A?

Select one:
a.

$1075.00

b.

$575.00

c.

$425.00

d.

$555.00

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Follow-up Question

Consider the following information about Firm A and Firm T:

Item   Firm A (Aquiring Firm  Firm T (Target Firm
Price/share $20 $15
Outstanidng shares 50 25
Total market value $1,000.00 $375

Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the merger premium?

Select one:
a.

$135.00

b.

$125.00

c.

$175.00

d.

$150.00

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