Question

Firm A is being acquired by Firm B for $24,000 worth of Firm B stock. The incremental value of the acquisition is $3,500. Firm A has 1,500 shares of stock outstanding at a price of $15 a share. Firm B has 1,200 shares of stock outstanding at a price of $30 a share. What is the value per share of Firm B after the acquisition?

Answer 1

Total number of shares offered to Firm A = $24,000 / $30 = 800 shares

Total number of shares outstanding Post Acquisition = 1200 + 800 = 2,000 shares

Vale per share = [(1,500 * 15) + (1,200 * 30) + $3,500] / 2,000

Vale per share = [$22,500 + $36,000 + $3,500] / 2000

Vale per share = $31 per share