Firm A is acquiring Firm B for £40,000 in cash.Firm A has 2,500 shares of equity outstanding at a market value of £18 a share.Firm B has 1,500 shares of equity outstanding at a market price of £25
A share.Neither ﬁrm has any debt.The net present value of the acquisition is £2,500.What is the
Value of Firm A after the acquisition?

Question

Quizplus · Accepted Answer

The value of Firm A after the acquisition is the sum of its original market value, the market value of Firm B, and the net present value of the acquisition: (2,500 shares * £18) + (1,500 shares * £25) + £2,500 = £45,000 + £37,500 + £2,500 = £47,500.

Firm a Is Acquiring Firm B for £40,000 in Cash