Under a fixed exchange ratio: a)The value of the transaction is fixed and is usually beneficial...

Under a fixed exchange ratio:

a)The value of the transaction is fixed and is usually beneficial to the buyer

b)The number of the shares issued by the acquirer is fixed and is usually beneficial to the buyer

c)The number of the shares issued by the acquirer is fixed and is usually beneficial to the seller

d)The value of the transaction is fixed and is usually beneficial to the seller

Expert Solution

b.The number of the shares issued by acquired is fixed and is usually benefecial to the buyer.

Under fixed exchange ratio, the buyer specifies the number of shares to be issued per share of seller, for example, the buyer may specify that it issues 2 shares per 1 share of seller company.

This transaction seals the deal irrespective of any decrease in value of buying company's share value.

The selling company will receive the fixed number of shares from buying company.

Whereas, in floating exchange rate we have the number of shares issued to be adjusted for price of the buyer company share, so that the total value of shares issued does not change.

jeff jeffy answered 2 years ago

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