Question

What price must a company typically pay to buy another company? The price will: 1. include some premium over the current market value of the target's equity. 2. include some discount relative to the current market value of the target's equity. 3. be the book value of the target's equity. 4. be the market value of the target's equity.

Answer 1

Answer: The correct answer is "1. include some premium over the current market value of the target's equity".

Explanation: This value above the market value of equity, consists of those intangible elements that in necessary relationship with a going concern contribute to profit.