76) Firm A is acquiring Firm T for $22,500 in cash. Firm A has 2,300 shares of stock
outstanding at a market value of $26 a share. Firm T has 1,200 shares of stock outstanding at a
market price of $17 a share. Neither firm has any debt. The net present value of the acquisition is
$1,900. What is the price per share of Firm A after the acquisition?
A) $26.00
B) $28.25
C) $26.83
D) $25.17
E) $26.50
77) 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 synergy value of the acquisition is $5,500. What is the net present value of
acquiring Alto to Solo?
A) $100
B) $400
C) $1,200
D) $2,400
E) $5,500
78) Principal is acquiring Secondary Companies for $38,000 in cash. Principal has 4,500 shares
of stock outstanding at a market price of $31 a share. Secondary has 1,600 shares of stock
outstanding at a market price of $22 a share. Neither firm has any debt. The net present value of
the acquisition is $2,400. What is the price per share of Principal after the acquisition?
A) $31.00
B) $30.78
C) $31.53
D) $32.10
E) $31.94
79) Firm X is being acquired by Firm Y for $35,000 cash which is being provided by retained
earnings. The synergy of the acquisition is $5,000. Firm X has 2,000 shares of stock outstanding
at a price of $16 a share. Firm Y has 10,200 shares of stock outstanding at a price of $46 a share.
What is the value of Firm Y after the acquisition?
A) $534,750
B) $471,200
C) $435,000
D) $468,900
E) $535,500
80) Western has a market value of $950 with 50 shares outstanding and a price per share of $19.
Eastern has a market value of $3,000 with 120 shares outstanding and a price per share of $25.
Eastern is acquiring Western by exchanging 40 of its shares for all 50 of Western’s shares. What
is the cost of the merger to Eastern’s stockholders if the merger creates $200 of synergy?
A) $1,333.33
B) $1,225.00
C) $1,037.50
D) $1,000.00
E) $950.00
81) Firm A has a market value of $6,000 with 150 shares outstanding and a price per share of
$40. Firm B has a market value of $800 with 40 shares outstanding and a price per share of $20.
Firm A is acquiring Firm B by exchanging 25 of its shares for all 40 of Firm B’s shares. Assume
the merger creates $500 of synergy. What will be the value of Firm B’s shareholders’ stake in the
merged firm?
A) $800
B) $1,021.30
C) $1,050.00
D) $1,042.86
E) $1,000.00
82) Firm X has a market value of $8,400 with 120 shares outstanding and a price per share of
$70. Firm Y has a market value of $2,000 with 100 shares outstanding and a price per share of
$20. Firm X is acquiring Firm Y by exchanging 30 of its shares for all 100 of Firm Y’s shares.
Assume the merger creates $400 of synergy. What will be the value of Firm A’s shareholders’
stake in the merged firm?
A) $8,080
B) $9,200
C) $8,820
D) $8,640
E) $9,050
83) Firm A is planning on merging with Firm B. Firm A currently has 2,300 shares of stock
outstanding at a market price of $20 a share. Firm B has 750 shares outstanding at a price of $15
a share. The merger will create $200 of synergy. How many of its shares should Firm A offer in
exchange for all of Firm B’s shares if it wants its acquisition cost to be $12,000?
A) 598
B) 607
C) 600
D) 584
E) 593
84) Firm X is planning on merging with Firm Y. Firm X currently has 3,500 shares of stock
outstanding at a market price of $25 a share. Firm Y has 400 shares outstanding at a price of $22
a share. The merger will create $500 of synergy. How many of its shares should Firm X offer in
exchange for all Firm Y’s shares if it wants its acquisition cost to be $9,000?
A) 408
B) 359
C) 409
D) 360
E) 375
85) Firm K is planning on merging with Firm L. Firm K currently has 5,500 shares of stock
outstanding at a market price of $28 a share. Firm L has 500 shares outstanding at a price of $16
a share. The merger will create $600 of synergy. Firm K plans to offer a sufficient number of its
shares to acquire Firm L at an acquisition cost of $8,200. How many total shares will be
outstanding in the merged firm?
A) 5,608
B) 5,792
C) 5,749
D) 5,760
E) 5,775
86) Rudy’s and Blackstone are all-equity firms. Rudy’s has 1,200 shares outstanding at a market
price of $36 a share. Blackstone has 2,500 shares outstanding at a price of $38 a share.
Blackstone is acquiring Rudy’s for $48,000 in cash. What is the merger premium per share?
A) $4.00
B) $4.25
C) $6.50
D) $8.00
E) $14.00
87) New England Fisheries (NEF) has 18,000 shares outstanding at a market price per share of
$14. Maryland Fish Markets (MFM) has 7,000 shares outstanding at a market price of $21 a
share. Neither firm has any debt. MFM is acquiring NEF for $275,000 in cash. What is the
merger premium per share?
A) $1.43
B) $1.28
C) $.81
D) $1.04
E) $2.07
88) Turner’s has $3.8 million in net working capital. The firm has fixed assets with a book value
of $48.6 million and a market value of $54.2 million. Martin & Sons is buying Turner’ for $61.5
million in cash. The acquisition will be recorded using the purchase accounting method. What is
the amount of goodwill that Martin & Sons will record on its balance sheet as a result of this
acquisition?
A) $0
B) $3.5 million
C) $6.6 million
D) $7.2 million
E) $9.1 million
89) Describe the three basic legal procedures that one firm can use to acquire another and briefly
discuss the advantages and disadvantages of each.
90) The empirical evidence strongly indicates that the stockholders of the target firm realize
wealth gains while the stockholders in the acquiring firm gain little, if anything, from an
acquisition. Although there exists no definitive answer as to why this is the case, several possible
explanations have been proposed. List and explain three possible explanations for the minimal
returns to the acquiring firm’s stockholders.
91) Sometimes the management of a target firm fights a takeover attempt even when that attempt
appears to be in the best interest of the shareholders. Why would management take this stance?
92) Explain the purpose of a standstill agreement and the basics of how it works.
93) Assume one firm acquires another in an all-cash transaction. Explain why the acquiring firm
generally carries the acquired fixed assets on their books at the pre-acquisition book values rather
than writing those assets up to their current market values, which they are allowed to do.