Winslow Co. has agreed to be acquired by Ferrier, Inc. for $25,000 worth of Ferrier stock. Ferrier currently has 1,500 shares of stock outstanding at a price of $21 a share. Winslow has 1,000 shares
Outstanding at a price of $22. The incremental value of the acquisition is $4,000. What is the value
Of Winslow Co. to Ferrier, Inc.?

Question

Quizplus · Accepted Answer

To calculate the value of Winslow Co. to Ferrier, Inc., we need to find the market value of Winslow's shares before the acquisition. We can do this by multiplying the number of shares outstanding by the price per share:
1,000 shares x $22 per share = $22,000

The incremental value of the acquisition is $4,000, which means the total value of the acquisition is:
$25,000 (value of Ferrier stock) - $4,000 (incremental value) = $21,000

Therefore, the total value of Winslow Co. to Ferrier, Inc. is the sum of the market value of Winslow's shares before the acquisition and the value of the acquisition:
$22,000 + $21,000 = $43,000

However, we are only interested in the value of Winslow Co. to Ferrier, Inc., which is $21,000. Therefore, the correct answer is C) $26,000, which is the market value of Winslow's shares before the acquisition plus the incremental value of the acquisition.