Firm B is willing to be acquired by ﬁrm A at a price of $34 a share in either cash or stock. The incremental value of the proposed acquisition is estimated at $80,000. How many shares of stock will ﬁrm AB have if the merger is an all-stock deal?

Question

Firm B is willing to be acquired by ﬁrm A at a price of $34 a share in either cash or stock. The incremental value of the proposed acquisition is estimated at $80,000.  How many shares of stock will ﬁrm AB have if the merger is an all-stock deal?

Quizplus · Accepted Answer

The incremental value of the proposed acquisition is $80,000, which equals the difference between the value of Firm A before and after the acquisition. Therefore, we can calculate the number of shares of Firm A exchanged in the all-stock deal using the following equation:

$80,000 = x * ($34 - $30)

Where x is the number of shares of Firm A exchanged. Solving for x, we get:

x = 62,667 shares

Therefore, Firm AB will have 62,667 shares if the merger is an all-stock deal.

Firm B Is Willing to Be Acquired by ﬁRm a at a Price