Jane's Footwear is planning on merging with Trailer Shoes. Jane's Footwear will pay Trailer Shoes' shareholders the current value of their stock in shares of Jane's Footwear stock. Jane's Footwear
Currently has 4,700 shares of stock outstanding at a market price of $25 a share. Trailer Shoes has
2,500 shares outstanding at a price of $31 a share. How many shares of stock will be outstanding in
The merged ﬁrm?

Question

Quizplus · Accepted Answer

The merged firm will have the sum of the shares of both companies. Jane's Footwear has 4,700 shares, and Trailer Shoes' shareholders will receive shares equivalent to the value of their 2,500 shares at $31 each, which is $77,500. At Jane's Footwear's price of $25 per share, this equals 3,100 shares. Thus, the total is 4,700 + 3,100 = 7,800 shares.

Jane's Footwear Is Planning on Merging with Trailer Shoes