Question 27-32

rate may be estimated using all but the one of the following The capital asset pricing model The replacement cost method The cost of capital The buildup method Price-to-carnings ratio b. d. e. 28, Acquiring Corp agrees to buy 100% of the outstanding shares of Trpt Corp in a share or share exchange. How would Acquiring Corp determine how many new share of ts stock it would have to issue? Multiply the purchase price premium paid for Target's stock by the number of shares of target stock outstanding. a. b. Multiply the share exchange ratio by the number of Acquirer shares outstanding Add the number of Acquirer and Target shares outstanding Multiply the share exchange ratio by the number of Target shares outstanding. Divide the share exchange ratio by the purchase price premium d. e. 29. What happens to the outstanding shares of the target firm when the acquirer purchases 100% of the target's outstanding stock? a. They are added to the number of shares of Acquirer stock outstanding b. They are cancelled. c. They are converted into preferred stock. d They are shown as treasury stock on the books of the combined companies. e. They are swapped for debt in the new company 30. The share exchange ratio is impacted by all of the following except for a. The current share price of the target firm b The current share price of the acquirer c. The offer price for the target firm d. The number of shares outstanding for the target firm e. A and D 31. All of the following statements are true about letters of intent except for a. Are always legally binding b. Spells out the initial areas of agreement between the buyer and seller c. Defines the responsibilities and rights of the buyer and seller while the letter of intent is in force d. Includes an expiration date e. Includes a "no shop" provision 32. Refining the target valuation based on new information uncovered during due diligence is most likel to affect which of the following a. Total consideration b The search process c. The business plan d. The acquisition plan e. The target's business plan