In the case of a merger that is stock financed, the assumed merger cost may be incorrect if the:
A)Value of the acquired firm's shares changes after the merger announcement
B)Value of the acquiring firm's shares changes after the merger announcement
C)Long-term interest rates increase
D)Merger is either horizontal or vertical

Question

Quizplus · Accepted Answer

The assumed merger cost may be incorrect if the value of the acquiring firm's shares changes after the merger announcement, as the stock used to finance the merger is valued based on the acquiring firm's share price.

In the Case of a Merger That Is Stock Financed