66) Pearl, Inc. has offered $218 million cash for all of the common stock in Jam Corporation.
Based on recent market information, Jam is worth $215 million as an independent operation. If
the merger makes economic sense for Pearl, what is the minimum estimated value of the
synergistic benefits from the merger?
A) $0
B) $5 million
C) $3 million
D) $1 million
E) $4 million
67) Prior to the merger, Firm A has $1,250 in total earnings with 750 shares outstanding at a
market price per share of $42. Firm B has $740 in total earnings with 220 shares outstanding at
$18 per share. Assume Firm A acquires Firm B via an exchange of stock at a price of $20 for
each share of B’s stock. Both A and B have no debt outstanding. What will the earnings per share
of Firm A be after the merger?
A) $2.10
B) $1.86
C) $1.95
D) $2.02
E) $2.33
68) The shareholders of Jolie Company have voted in favor of a buyout offer from Pitt
Corporation. Jolie has a price-earnings ratio of 6, earnings of $230,000, and 60,000 shares
outstanding. Pitt has a price-earnings ratio of 12, earnings of $660,000, and 125,000 shares
outstanding. Jolie’s shareholders will receive one share of Pitt stock for every three shares they
hold in Jolie. Assume the NPV of the acquisition is zero. What will the post-merger PE ratio be
for Pitt?
A) 10.76
B) 9.20
C) 9.84
D) 10.32
E) 11.21
69) TJ’s and Corner Grocery are all-equity firms. TJ’s has 2,500 shares outstanding at a market
price of $16.70 a share. Corner Grocery has 3,000 shares outstanding at a price of $22.50 a share.
Corner Grocery is acquiring TJ’s for $45,000 in cash. What is the merger premium per share?
A) $0
B) $1.30
C) $1.11
D) $1.28
E) $.32
70) The Cycle Stop has 1,400 shares outstanding at a market price per share of $10.80. Kate’s
Wheels has 1,750 shares outstanding at a market price of $13 a share. Neither firm has any debt.
Kate’s Wheels is acquiring The Cycle Stop for $16,500 in cash. What is the merger premium per
share?
A) $.27
B) $.46
C) $.99
D) $1.21
E) $2.20
71) Rural Markets and Flo’s Flowers are all-equity firms. Rural Markets has 2,300 shares
outstanding at a market price of $16.50 a share. Flo’s Flowers has 5,000 shares outstanding at a
price of $17 a share. Flo’s Flowers is acquiring Rural Markets for $39,000 in cash. The
incremental value of the acquisition is $1,800. What is the net present value of acquiring Rural
Markets to Flo’s Flowers?
A) $750
B) −$1,050
C) −$250
D) $400
E) $1,800
72) Taylor’s Hardware is acquiring The Corner Store for $27,400 in cash. Taylor’s has 1,500
shares of stock outstanding at a market value of $44 a share. The Corner Store has 2,100 shares
of stock outstanding at a market price of $12 a share. Neither firm has any debt. The incremental
value of the acquisition is $1,700. What is the value of Taylor’s Hardware after the acquisition?
A) $49,000
B) $50,300
C) $57,300
D) $65,500
E) $72,400
73) Firm A is acquiring Firm B for $69,000 in cash. Firm A has 4,300 shares of stock
outstanding at a market value of $32 a share. Firm B has 2,100 shares of stock outstanding at a
market price of $32 a share. Neither firm has any debt. The incremental value of the acquisition
is $2,200. What is the price per share of Firm A’s stock after the acquisition?
A) $31.98
B) $31.45
C) $32.09
D) $32.16
E) $32.33
74) The Cookie Shoppe and Sweet Treats are all-equity firms. The Cookie Shoppe has 3,400
shares outstanding at a market price of $31 a share. Sweet Treats has 6,100 shares outstanding at
a price of $42 a share. Sweet Treats is acquiring the Cookie Shoppe for $107,500 in cash. The
incremental value of the acquisition is $2,900. What is the net present value of the acquisition?
A) $1,600
B) $800
C) $700
D) −$2,100
E) −$300
75) Sleep Tight is acquiring Restful Inns for $52,500 in cash. Sleep Tight has 3,000 shares of
stock outstanding at a market price of $38 a share. Restful Inns has 2,100 shares of stock
outstanding at a market price of $24 a share. Neither firm has any debt. The incremental value of
the acquisition is $1,700. What is the price per share of Sleep Tight after the acquisition?
A) $36.92
B) $37.30
C) $37.87
D) $39.19
E) $39.29
76) Outdoor Living has agreed to be acquired by New Adventures for $100,000 worth of New
Adventures stock. New Adventures currently has 12,000 shares of stock outstanding at a price of
$27 a share. Outdoor Living has 2,000 shares outstanding at a price of $46 a share. The
incremental value of the acquisition is $12,000. What is the value of the merged firm?
A) $285,500
B) $328,000
C) $437,000
D) $320,500
E) $428,000
77) Moore Industries has agreed to be acquired by Scott Enterprises for 800 shares of Scott
Enterprises stock. Scott Enterprises currently has 7,500 shares of stock outstanding at a price of
$28 a share. Moore Industries has 1,800 shares outstanding at a price of $12 a share. The
incremental value of the acquisition is $1,100. What is the value per share of Scott Enterprises
stock after the acquisition?
A) $27.52
B) $27.96
C) $28.04
D) $28.47
E) $31.03
78) Aardvark Enterprises has agreed to be acquired by Lawson Products in exchange for $30,000
worth of Lawson Products stock. Lawson has 3,000 shares of stock outstanding at a price of $28
a share. Aardvark has 1,100 shares outstanding with a market value of $23 a share. The
incremental value of the acquisition is $1,400. What is the value of Lawson Products after the
merger?
A) $79,400
B) $83,000
C) $111,600
D) $110,700
E) $143,000
79) Hanover Tires is being acquired by Better Tires for $85,000 worth of Better Tires stock.
Hanover Tires has 2,600 shares of stock outstanding at a price of $32 a share. Better Tires has
7,500 shares outstanding with a market value of $29 a share. The incremental value of the
acquisition is $2,200. How many new shares of stock will be issued to complete this acquisition?
A) 2,872
B) 3,016
C) 3,133
D) 2,931
E) 2,987
80) Glendale Marine is being acquired by Inland Motors for $60,000 worth of Inland Motors
stock. Inland Motors has 8,200 shares of stock outstanding at a price of $51 a share. Glendale
Marine has 1,600 shares outstanding with a market value of $36 a share. The incremental value
of the acquisition is $3,200. What is the total number of shares in the new firm?
A) 9,229
B) 9,376
C) 9,529
D) 9,852
E) 9,900
81) Firm B is being acquired by Firm A for $166,000 worth of Firm A stock. The incremental
value of the acquisition is $5,200. Firm A has 11,500 shares of stock outstanding at a price of
$40 a share. Firm B has 6,500 shares of stock outstanding at a price of $25 a share. What is the
value per share of Firm A after the acquisition?
A) $39.97
B) $40.22
C) $40.00
D) $40.11
E) $40.04
82) Firm A is being acquired by Firm B for $62,000 worth of Firm B stock. The incremental
value of the acquisition is $4,300. Firm A has 2,700 shares of stock outstanding at a price of $22
a share. Firm B has 10,400 shares of stock outstanding at a price of $31 a share. What is the
actual cost of the acquisition using company stock?
A) $62,000
B) $62,076
C) $62,274
D) $63,780
E) $62,620
83) Mercantile Exchange is being acquired by National Sales. The incremental value of the
acquisition is $2,500. Mercantile Exchange has 1,200 shares of stock outstanding at a price of
$26 a share. National Sales has 6,500 shares of stock outstanding at a price of $54 a share. What
is the net present value of the acquisition given that the actual cost of the acquisition using
company stock is $32,780?
A) $887
B) $1,011
C) $920
D) $367
E) $1,046
84) VC is merging with DRW. VC will pay DRW’s shareholders the current value of their shares
in shares of VC stock. VC currently has 15,200 shares of stock outstanding at a market price of
$28 a share. DRW has 2,500 shares outstanding at a price of $20 a share. How many shares of
stock will be outstanding in the merged firm?
A) 16,840 shares
B) 17,061 shares
C) 17,200 shares
D) 16,986 shares
E) 18,609 shares
85) Alpha is planning on merging with Beta. Alpha will pay Beta’s shareholders the current
value of their stock in shares of Alpha. Alpha currently has 6,500 shares of stock outstanding at a
market price of $44 a share. Beta has 2,100 shares outstanding at a price of $22 a share. The
post-merger earnings will be $10,400. What will the earnings per share be after the merger?
A) $1.43
B) $1.38
C) $1.25
D) $1.51
E) $1.16
86) George’s Equipment is planning on merging with Nelson Machinery. George’s will pay
Nelson’s shareholders the current value of their stock in shares of George’s Equipment. George’s
currently has 4,600 shares of stock outstanding at a market price of $31 a share. Nelson’s has
1,600 shares outstanding at a price of $38 a share. What is the value per share of the merged firm
assuming there is no synergy?
A) $30.77
B) $31.00
C) $31.29
D) $31.74
E) $32.06
87) Al’s is analyzing the possible acquisition of Baker’s. Both firms have no debt. Al’s believes
the acquisition will increase its total aftertax annual cash flows by $2.8 million indefinitely. The
current market value of Baker’s is $91 million, and that of Al’s is $143.6 million. The appropriate
discount rate for the incremental cash flows is 11 percent. Al’s is trying to decide whether it
should offer 40 percent of its stock or $104 million in cash to Baker’s shareholders. The cost of
the cash alternative is ________, while the cost of the stock alternative is ________.
A) $91,000,000; $90,824,141
B) $91,000,000; $104,000,000
C) $91,000,000; $91,338,092
D) $104,000,000; $104,021,818
E) $104,000,000; $103,837,209
88) The bidding firm (Firm B) has 2,300 premerger shares outstanding at $43 a share. The target
firm (Firm T) has 1,100 premerger shares outstanding at $24 a share. Assume neither firm has
any debt outstanding. Firm B has estimated that the value of the synergistic benefits from
acquiring Firm T is $2,600. What is the NPV of the merger assuming that Firm T is willing to be
acquired for $26 per share in cash?
A) $400
B) $100
C) $800
D) $2,200
E) $2,600
89) Lucas Motors is considering the acquisition of TM Repair. Lucas has 43,000 shares
outstanding at a market price of $32 a share. TM has 12,800 shares outstanding priced at $44 a
share. The acquisition is expected to create $5,400 of synergy. What is the maximum amount of
cash Lucas should pay for this acquisition?
A) $568,600
B) $1,376,000
C) $446,073
D) $563,200
E) $1,381,400