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1. The Prad Corporation is considering a merger with the Stone Company which has 500,000 outstanding shares selling for $30. An investment banker has advised that to succeed in its merger Prad Corp. would have to offer $45 per share for Stone's stock. Prad Corp. stock is selling for $25. How many shares of Prad Corp. stock would have to be exchanged to acquire all of Stone's stock?
A. 266,667
B. 600,000
C. 900,000
D. none of these
2. Which of the following is not a financial motive but rather an operating motive for merger and consolidation?
A. The portfolio diversification effect
B. Tax-loss carryforward
C. Greater financing capability
D. Synergy
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