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ABC and XYZ Are All-Equity Firms

Question 51

Multiple Choice

ABC and XYZ are all-equity firms. ABC has 1,750 shares outstanding at a market price of $20 a share. XYZ has 2,500 shares outstanding at a price of $28 a share. XYZ is acquiring ABC for $36,000 in cash. The incremental value of the acquisition is $3,000. What is the net present value of acquiring ABC to XYZ?


A) $1,000
B) $2,000
C) $3,000
D) $4,000
E) $5,000

Correct Answer:

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