Corporate Finance II: Financing Investments and Managing Risk | Online Course Support

Suppose an acquirer is buying a target for a price of 50B for the equity of the target. The target has no cash and 20B in debt. The acquirer currently has debt equal to 30B. The acquirer is not using any of its own cash to finance the deal and is paying for the acquisition in cash. The acquirer’s current equity value is 100B dollars (prior to the deal). The acquirer’s equity value did not change when the acquisition was announced. Which of the following option is correct?

 
 
 
 
 

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