Firm A is being acquired by Firm B for $54,000 worth of Firm B stock.The incremental value of the acquisition is $5,600.Firm A has 2,400 shares of stock outstanding at a price of $19 a share.Firm B has 2,700 shares of stock outstanding at a price of $50 a share.What is the actual cost of the acquisition using company stock?
A)$50,509
B)$52,276
C)$53,200
D)$56,780
E)$60,600

Question

Quizplus · Accepted Answer

Number of shares issued = $54,000/$50 = 1,080 sharesValue per share after merger = [(2,400 × $19) + (2,700 × $50) + $5,600]/[2,700 + 1,080] = $49.2593Actual cost of acquisition = 1,080 × $49.2593 = $53,200

Firm a Is Being Acquired by Firm B for $54,000