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

Question

Quizplus · Accepted Answer

The correct answer is A because the maximum amount of cash Lucas should pay for this acquisition is $568,600. This is calculated by taking the market value of TM's shares ($44 x 12,800 = $563,200) and adding the synergy value ($5,400).

Lucas Motors Is Considering the Acquisition of TM Repair