Outdoor Living has agreed to be acquired by New Adventures for $100,000 worth of New Adventures stock. New Adventures currently has 12,000 shares of stock outstanding at a price of $27 a share. Outdoor Living has 2,000 shares outstanding at a price of $46 a share. The incremental value of the acquisition is $12,000. What is the value of the merged firm?

Question

Quizplus · Accepted Answer

The value of the merged firm is calculated by adding the value of New Adventures, the value of Outdoor Living, and the incremental value of the acquisition. New Adventures is valued at 12,000 shares * $27 = $324,000. Outdoor Living is valued at 2,000 shares * $46 = $92,000. The total value before the incremental value is $324,000 + $92,000 = $416,000. Adding the incremental value of $12,000 gives a total value of $428,000.

Outdoor Living Has Agreed to Be Acquired by New Adventures