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

First, we need to calculate how many shares of New Concepts will be issued to acquire Watson's:

$30,000 / $24 = 1,250 shares of New Concepts stock

Now we can calculate the post-merger value of New Concepts:

New Concepts market value before merger: 2,300 shares x $24 = $55,200
Watson's market value before merger: 1,300 shares x $21 = $27,300
Incremental value of the acquisition: $1,200

Total post-merger value: $55,200 + $27,300 + $1,200 = $83,700

Therefore, the correct answer is D) $83,700.

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