Schweser Practice Exam Vol 1, Exam 3, Q 15

CFA Level II
#1

Hi All,

with regards to the sibjected question under Corporate finance, the explanation to the question says that in the stock deal, cash payment (made by acquirer) should be added to the Value of acquirer and value of target. In the LOS (SS9 LOS 32k) for the stock deal the value of target and acquired are added and divided by the revised number of shares.

I feel that stock deal should not have a any cash component to it.

Could anyone help me if I am missing something?

Thanks,

#2

The reason is , in question 1 they use cash offer. U have to work around to find synergies…

In next question they say instead of cash offer they make stock offer, therefore you have to add the cash they already paid before to get the post merger value ( I recall this based on memory bcos I did it quite a few weeks ago but I’m sure that’s the way it is)