Calipers, Inc. is acquiring Johnson Warehouse for $47,000 in cash. Calipers has 2,700 shares of stock outstanding at a market value of $32 a share. Johnson Warehouse has 3,200 shares of stock
Outstanding at a market price of $14 a share. Neither ﬁrm has any debt. The net present value of the
Acquisition is $1,800. What is the value of Caliper's after the acquisition?

Question

Quizplus · Accepted Answer

To find the value of Caliper's after the acquisition, we need to add the cash paid for the acquisition to the market value of Caliper's stock and the market value of Johnson Warehouse's stock:

Cash paid for acquisition = $47,000
Market value of Caliper's stock = 2,700 shares x $32/share = $86,400
Market value of Johnson Warehouse's stock = 3,200 shares x $14/share = $44,800

Total value of Caliper's after the acquisition = $47,000 + $86,400 + $44,800 = $178,200

Since the net present value of the acquisition is $1,800, we need to subtract that from the total value:

Total value of Caliper's after the acquisition - Net present value of the acquisition = $178,200 - $1,800 = $176,400

Therefore, the value of Caliper's after the acquisition is $86,000 (Option B).