CFA Practice Question

There are 86 practice questions for this study session.

CFA Practice Question

The maximum price that the acquirer should pay in a merger transaction is:

A. The post-merger value of the target company.
B. Synergies + VT.
C. VA + VT + S - C.
Correct Answer: B

User Contributed Comments 2

User Comment
NIKKIZ Isn't B technically equivalent to A? I understand that the value of the target company + synergies should be equal to the value of the target company post-merger. Undeniably, the value of the company post-merger is uncertain - same as intrinsic value, but then again, the value of the synergies can only be estimated.
DevanCFA My thinking was that answer A seems to only reference the post-merger value of the target and not the post-merger value of the acquirer, while B focuses pre-merger value of the target and the synergy (extra value added) across both companies.
You need to log in first to add your comment.