Question

Aardvark Enterprises has agreed to be acquired by Lawson Products in exchange for $16,000 worth of Lawson Products stock. Lawson has 1,100 shares of stock outstanding at a price of $15 a share. Aardvark has 1,700 shares outstanding with a market value of $21 a share. The incremental value of the acquisition is $3,800. What is the value of Lawson Products after the merger? $51,520 $41,440 $56,000 $49,280 $44,800

Answer 1

Answer: $56000

Step-by-step explanation:

The value of Lawson Products after the merger will be calculated thus:

Number of shares = 1100

Price of share = $15

Value of Lawson share = $16500

Number of shares = 1700

Price of share = $21

Value of Aardvark share = $35700

Market value of both firms will be:

= $16500 + $35700

= $52200

We then less incremental earnings from the market value and this will be:

= $52200 + $3800

= $56000

Therefore, the value of Lawson Products after the merger is $56000