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Question
Consider the following premerger information about a bidding firm (Buyitall Inc.) and a target firm (Tarjay Corp.). Assume that neither firm has any debt outstanding.
Buyitall has estimated that the present value of any enhancements that Buyitall expects from acquiring Tarjay is $2,600. What is the NPV of the merger assuming that Tarjay is willing to be acquired for $28 per share in cash?
A. $400
B. $600
C. $1,800
D. $2,200
E. $2,600
F. None of the above.
Answer
This answer is hidden. It contains 143 characters.
Related questions
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Q:
Which of the following statements are correct concerning diversifiable, or unsystematic, risks?
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II. There is no reward for accepting diversifiable risks.
III. Diversifiable risks are generally associated with an individual firm or industry.
IV. Beta measures diversifiable risk.
A. I and III only
B. II and IV only
C. I and IV only
D. I, II, and III only
E. I, II, III, and IV
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Q:
Unsystematic risk:
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B. is compensated for by the risk premium.
C. is measured by beta.
D. is measured by standard deviation.
E. is related to the overall economy.
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Q:
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A. beta; alpha
B. beta; standard deviation
C. WACC; beta
D. standard deviation; beta
E. standard deviation; variance
F. None of the above.
Q:
When making a capital budgeting decision, which of the following is/are NOT relevant?
I. The size of a cash flow.
II. The risk of a cash flow.
III. The accounting earnings from a cash flow.
IV. The timing of a cash flow.
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B. II only
C. III only
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E. III and IV only
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Q:
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I. The IRR is the discount rate at which an investment's NPV equals zero.
II. An investment should be undertaken if the discount rate exceeds the IRR.
III. The IRR tends to be used more than net present value simply because its results are easier to comprehend.
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A. I and II only
B. I and III only
C. II and III only
D. I, II, and IV only
E. I, II, III, and IV
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Q:
Which of the following figures of merit does not directly take into consideration the time value of money?
I. Payback period
II. Internal rate of return
III. Net present value (NPV)
IV. Accounting rate of return
A. IV only
B. I & III only
C. II & III only
D. I & II only
E. I & IV only
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Q:
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II. Distress costs
III. Management incentives
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B. I and III only
C. II and IV only
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Q:
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Q:
Depreciation expense:
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D. is a noncash item that increases net income.
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Q:
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C. cash flow statement
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C. cash flow statement
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Q:
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Q:
Which of the following statements are true?
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II. Shelf registrations and private placements are examples of seasoned security issues.
III. Issue costs for debt are typically greater than issue costs for equity.
IV. Private equity financing is a common source of financing for startup firms.
A. I and II only
B. I and III only
C. I, II, and IV only
D. I, III, and IV only
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Q:
The sustainable growth rate of a firm is best described as the:
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B. minimum growth rate achievable if the firm maintains a constant equity multiplier.
C. maximum growth rate achievable excluding external financing of any kind.
D. maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio.
E. maximum growth rate achievable with unlimited debt financing.
F. None of the above.
Q:
Which one of the following correctly defines the retention ratio?
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E. net income minus cash dividends
F. None of the above.
Q:
The retention ratio is:
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B. the percentage of net income available to the firm to fund future growth.
C. equal to one minus the asset turnover ratio.
D. the change in retained earnings divided by the dividends paid.
E. the dollar increase in net income divided by the dollar increase in sales.
F. None of the above.
Q:
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Q:
Which of the following are viable techniques to cope with the uncertainty inherent in realistic financial projections?
I. Simulation
II. Ad hoc adjustments
III. Scenario analysis
IV. Sensitivity analysis
A. II and IV only
B. III and IV only
C. II, III, and IV only
D. I, II, and III only
E. I, III, and IV only
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Q:
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C. $4.17 billion
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Q:
Which of the following statements are correct?
I. Liquidation value of a firm is equal to the present worth of expected future cash flows from operating activities.
II. When an acquiring firm purchases a target firm's equity, the acquirer must assume the target's liabilities.
III. The market value of a public company reflects the worth of the business to minority investors.
IV. The fair market value of a business is usually the lower of its liquidation value and its going-concern value.
A. I and III only
B. II and IV only
C. II and III only
D. I, II, and III only
E. II, III, and IV only
F. None of the above.