Watson's Office Supply has agreed to be acquired by New Concepts for $30,000 worth of New Concepts stock. New Concepts currently has 2,300 shares of stock outstanding at a price of $24 a share. Watson's has 1,300 shares outstanding at a price of $21. The incremental value of the acquisition is $1,200. What is the valued of the merged firm?

Question

Quizplus · Accepted Answer

The value of the merged firm can be calculated by adding the value of both firms and the incremental value of the acquisition. The value of New Concepts is 2,300 shares * $24 = $55,200. The value of Watson's is 1,300 shares * $21 = $27,300. The total value before the incremental value is $55,200 + $27,300 = $82,500. Adding the incremental value of $1,200 gives a total value of $82,500 + $1,200 = $83,700.

Watson's Office Supply Has Agreed to Be Acquired by New