The Sligo Co.is planning on merging with the Thorton Co.Sligo will pay Thorton's equityholders the current value of their equity in shares of Sligo.Sligo currently has 2,300 shares of equity
Outstanding at a market price of £20 a share.Thorton has 1,800 shares outstanding at a price of £15
A share.How many shares of equity will be outstanding in the merged ﬁrm?
A)1,800 shares
B)2,300 shares
C)2,750 shares
D)3,650 shares
E)4,100 shares

Question

Quizplus · Accepted Answer

First, calculate the total value of Thorton's equity: 1,800 shares * £15/share = £27,000. Then, determine how many shares of Sligo this equates to: £27,000 / £20/share = 1,350 shares. Add this to Sligo's original 2,300 shares for a total of 3,650 shares in the merged firm.