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 value of the acquiring firm's shares directly impacts the cost of a stock-financed merger. If the acquiring firm's share value changes after the merger announcement, the actual cost of the merger in terms of the number of shares issued could differ from the initially assumed cost.

In the Case of a Merger That Is Stock Financed