A merger is expected to produce cost savings of $50 million and the acquired firm's shareholders will receive a premium of 20% over the $150 million value of their firm. The gain of the merger to the acquirer is:
1) $20 million.
2) $30 million.
4) $130 million.
Which of the following is the most appropriate reason for an acquiring firm's shareholders to prefer using stock financing for acquisitions?
1)There is no cash outflow.
2)It mitigates the effects of over valuation of the target firm.
3)It mitigates the effects of under valuation of the target firm.
Empirical studies show that the operating efficiency of firms having undergone a leverage buy-out, ______ over the following 3 years.
3)Does not change
4) Shows no clear trend
When two firms merge, the value of the acquiring firm will change by the:
1)gain from the merger.
3)NPV of the merger.
4)cost of the merger.
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