Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 3,000 shares of stock outstanding at a market price of $15 a share. Firm B has 1,000 shares outstanding at a price of $10 a share. What is the value of the merged firm?
A) $25,000
B) $45,000
C) $55,000
D) $60,000
E) None of these

Question

Quizplus · Accepted Answer

The value of the merged firm is the sum of the market values of both firms: Firm A's value is 3,000 shares * $15 = $45,000, and Firm B's value is 1,000 shares * $10 = $10,000. Therefore, the total value is $45,000 + $10,000 = $55,000.

Firm a Is Planning on Merging with Firm B