Quantum is planning on merging with Reliant Energy. Quantum currently has 80,000 shares of stock outstanding at a market price of $32.60 a share. Reliant Energy has 50,000 shares outstanding at a price of $24.50 a share. The merger will create $450,000 of synergy. How many of its shares should Quantum offer in exchange for all of Reliant Energy s share if it wants its acquisition cost to be $1,443,000?

The multiple choices are:

a.44,172

b.43,109

c.42,377

d.40,648

e.41,205

Option D,40,648 is the correct option

Explanation:

The number of shares to offer to Reliant energy would be the acquisition cost divided Quantum post acquisition share price

The share price can be computed thus:

Market of Reliant =$24.50*50,000=$1,225,000

Market value of Quantum=$32.60*80,000=$2,608,000

Reliant is now worth(acquisition cost)           =$1,443,000

Reliant shareholders' share of synergy=$1,443,000-$1,225,000=$218,000

Remnant of synergy left for Quantum=$450,000-$218,000=$232,000

Share price of Quantum post merger=($2,608,000+$232,000)/80,000=$35.5

Number of shares to issue to Reliant=$1,443,000/$35.5=40,648 shares

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.