The Glass Works has a market value of $336,000.Creative Pottery has 23,800 shares of stock outstanding at a price per share of $37.Creative Pottery is acquiring The Glass Works in exchange for 9,200 shares of Creative Pottery stock.The merger is expected to create $24,000 of synergy.What is the NPV of the acquisition?

Question

Quizplus · Accepted Answer

Number of postmerger shares = 25,000 + 8,00023,800 + 9,200 = 33,000 shares V_AB = $336,000 + (23,800 × $37)+ $24,000 = $1,240,600 Postmerger share value = $1,240,600 / 33,000 = $37.5939 NPV of acquisition = $336,000 + $24,000 − (9,200 × $37.5939)= $14,136

The Glass Works Has a Market Value of $336,000