Exam 29: Mergers, Acquisitions, and Divestitures

Brite Industries has agreed to merge with Nu-Day,Inc. for $20,000 worth of Nu-Day stock. Brite has 1,200 shares of stock outstanding at a price of $15 a share. Nu-Day has 2,000 shares outstanding with a market value of $19 a share. The incremental value of the acquisition is $3,500. What is the value of Nu-Day after the merger?

Rudy's,Inc. and Blackstone,Inc. are all-equity firms. Rudy's has 1,500 shares outstanding at a market price of $22 a share. Blackstone has 2,500 shares outstanding at a price of $38 a share. Blackstone is acquiring Rudy's for $36,000 in cash. The incremental value of the acquisition is $3,500. What is the value of Rudy's Inc. to Blackstone?

When evaluating an acquisition,you should:

Firm X is being acquired by Firm Y for $35,000 worth of Firm Y stock. The incremental value of the acquisition is $2,500. Firm X has 2,000 shares of stock outstanding at a price of $16 a share. Firm Y has 1,200 shares of stock outstanding at a price of $40 a share. What is the actual cost of the acquisition using company stock?

Which one of the following is most likely a good candidate for an acquisition that could benefit from the use of complementary resources?

In a merger the:

A business deal in which all publicly owned stock in a firm is replaced with complete equity ownership by a private group is called a:

Firm V was worth $500 and Firm A had a market value of $400. Firm V acquired Firm A for $450 because they thought the combination of the new Firm VA was worth $1,000. What is the NPV from the merger of Firm V and Firm A?

A merger in which an entirely new firm is created and both the acquired and acquiring firms cease to exist is called a:

Firm V was worth $450 and Firm A had a market value of $375. Firm V acquired Firm A for $425 because they thought the combination of the new Firm VA was worth $925. What is the NPV from the merger of Firm V and Firm A?

The value of a target firm to the acquiring firm is equal to:

Alto and Solo are all-equity firms. Alto has 2,400 shares outstanding at a market price of $24 a share. Solo has 4,000 shares outstanding at a price of $17 a share. Solo is acquiring Alto for $63,000 in cash. The incremental value of the acquisition is $5,500. What is the net present value of acquiring Alto to Solo?

Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 3,000 shares of stock outstanding at a market price of $15 a share. Firm B has 1,000 shares outstanding at a price of $10 a share. What is the value of the merged firm?

Discuss why AT&T purchased T-Mobile in 2011.

Goodday & Sons is being acquired by Baker,Inc. for $19,000 worth of Baker stock. Baker has 1,500 shares of stock outstanding at a price of $25 a share. Goodday has 1,000 shares outstanding with a market value of $16 a share. The incremental value of the acquisition is $2,000. How many new shares of stock will be issued to complete this acquisition?

Which of the following is not true of an acquisition of stock or tender offer?

The acquisition of a firm involved with a different production process stage than the bidder is called a _____ acquisition.

Which one of the following statements is correct?

Which of the following represent potential gains from an acquisition? I. the replacement of ineffective managers II. lower costs per unit produced III. an increase in production size so that diseconomies of scale are realized IV. spreading of overhead costs

Western Fronts is being acquired by Eastern Slopes for $30,000 worth of Eastern Slopes stock. The incremental value of the acquisition is $2,000. Western Fronts has 1,900 shares of stock outstanding at a price of $15 a share. Eastern Slopes has 1,500 shares of stock outstanding at a price of $40 a share. What is the net present value of the acquisition given that the actual cost of the acquisition using company stock is $30,167?