Question

Firm A is acquiring Firm B for $25,000 in cash. Firm A has 2,000 shares of stock outstanding at a market value of $21 a share. Firm B has 1,200 shares of stock outstanding at a market price of $17 a share. Neither firm has any debt. The net present value of the acquisition is $1,500. What is the price per share of Firm A after the acquisition

Answer 1

$21.75

Step-by-step explanation:

The computation of the price per share of Firm A after the acquisition is shown below:

= (Firm A market value + net present value of the acquisition) ÷ (Number of shares outstanding)

= (2,000 shares × $21 + $1,500) ÷ (2,000 shares)

= $43,500 ÷ 2,000 shares

= $21.75

Simply we divide the total value by the number of outstanding shares

And, All other information which is given is not relevant. Hence, ignored it