Wilson's has 6,000 shares of stock outstanding at a market price per share of $19.Neilsen's has 22,000 shares outstanding that sell for $33 a share.By merging,$11,000 of synergy can be created.Neilsen's is acquiring Wilson's for $115,005 worth of Neilsen stock.What is the postmerger value per share?
A)$33.39
B)$33.00
C)$29.97
D)$29.42
E)$28.15

Question

Quizplus · Accepted Answer

The post-merger value is calculated by adding the market values of both companies and the synergy, then dividing by the total number of shares post-merger. Wilson's value is 6,000 * $19 = $114,000. Neilsen's value is 22,000 * $33 = $726,000. The total value post-merger is $114,000 + $726,000 + $11,000 = $851,000. Neilsen's is acquiring Wilson's for $115,005 worth of stock, which means they issue $115,005 / $33 = 3,485 additional shares. The total number of shares post-merger is 22,000 + 3,485 = 25,485. The post-merger value per share is $851,000 / 25,485 = $33.39.

Wilson's Has 6,000 Shares of Stock Outstanding at a Market