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 $21 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?

Question

Quizplus · Accepted Answer

Number of shares issued = $54,000/$50 = 1,080 sharesValue per share after merger = [(2,400 F1F1F1S1F1F1F10 $21) + (2,700 F1F1F1S1F1F1F10 $50) + $5,600]/[2,700 + 1,080] = $50.5291Actual cost of acquisition = 1,080 F1F1F1S1F1F1F10 $50.5291 = $54,571

Firm a Is Being Acquired by Firm B for $54,000