Jennifer's Boutique has 2,100 shares outstanding at a market price per share of £26.Sally's has 3,000 shares outstanding at a market price of £41 a share.Neither ﬁrm has any debt.Sally's is
Acquiring Jennifer's for £58,000 in cash.The incremental value of the acquisition is £2,500.What is
The value of Jennifer's Boutique to Sally's?

Question

Quizplus · Accepted Answer

First, we need to find the market value of Jennifer's Boutique before the acquisition:

Market value of Jennifer's Boutique = number of shares outstanding x market price per share
Market value of Jennifer's Boutique = 2,100 x £26
Market value of Jennifer's Boutique = £54,600

Next, we need to add the incremental value of the acquisition to find the total value of Jennifer's Boutique for Sally's:

Total value of Jennifer's Boutique = market value of Jennifer's Boutique + incremental value of acquisition
Total value of Jennifer's Boutique = £54,600 + £2,500
Total value of Jennifer's Boutique = £57,100

Therefore, the correct answer is C) £57,100 as this is the total value of Jennifer's Boutique for Sally's after the acquisition.

Jennifer's Boutique Has 2,100 Shares Outstanding at a Market Price