Glendale Marine is being acquired by Inland Motors for $60,000 worth of Inland Motors stock. Inland Motors has 8,200 shares of stock outstanding at a price of $51 a share. Glendale Marine has 1,600 shares outstanding with a market value of $36 a share. The incremental value of the acquisition is $3,200. What is the total number of shares in the new firm?

Question

Quizplus · Accepted Answer

The total value of the new firm is the sum of the market value of both companies plus the incremental value: (8,200 * $51) + (1,600 * $36) + $3,200. The total number of shares is the original shares of Inland Motors plus the new shares issued for the acquisition: 8,200 + ($60,000 / $51).

Glendale Marine Is Being Acquired by Inland Motors for $60,000