Alexandra's is being acquired by David's,Inc. for $20,000 worth of David's stock. Miller has 1,300 shares of stock outstanding at a price of $20 a share. Holiday has 1,000 shares outstanding with a market value of $18 a share. The incremental value of the acquisition is $2,000. 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 value of both companies plus the incremental value: (1,300 shares * $20) + (1,000 shares * $18) + $2,000 = $26,000 + $18,000 + $2,000 = $46,000. Since David's is acquiring Alexandra's for $20,000 worth of stock, the remaining value of the new firm is $46,000 - $20,000 = $26,000. The total number of shares in the new firm is the sum of the shares from both companies: 1,300 + 1,000 = 2,300 shares.

Alexandra's Is Being Acquired by David's,Inc