Firm B is being acquired by Firm A for $162,000 worth of Firm A stock. The incremental value of the acquisition is $4,600. Firm A has 8,500 shares of stock outstanding at a price of $36 a share. Firm B has 5,900 shares of stock outstanding at a price of $27 a share. What is the value per share of Firm A after the acquisition?
Value per share = [(8,500 × $36) + (5,900 × $27) + $4,600]/[8,500 + ($162,000/$36)] = $36.15
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72.
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Firm A is being acquired by Firm B for $54,000 worth of Firm B stock. The incremental value of the acquisition is $5,600. Firm A has 2,400 shares of stock outstanding at a price of $19 a share. Firm B has 2,700 shares of stock outstanding at a price of $50 a share. What is the actual cost of the acquisition using company stock?
Number of shares issued = $54,000/$50 = 1,080 shares
Value per share after merger = [(2,400 × $19) + (2,700 × $50) + $5,600]/[2,700 + 1,080] = $49.2593 Actual cost of acquisition = 1,080 × $49.2593 = $53,200 |
73.
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Merchantile Exchange is being acquired by National Sales. The incremental value of the acquisition is $1,800. Merchantile Exchange has 1,500 shares of stock outstanding at a price of $18 a share. National Sales has 3,500 shares of stock outstanding at a price of $54 a share. What is the net present value of the acquisition given that the actual cost of the acquisition using company stock is $28,780?
Net present value = [(1,500 × $18) + $1,800] - $28,780 = $20
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