Suppose that the market price of Company A is $50 per share and that of Company B is $20. If A offers half a share of common stock for each share of B, what is the percentage increase in wealth for B's shareholders? (Assume that the offer has no effect on the value of A's shares.)

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If Company A offers half a share for each share of B, B's shareholders receive 0.5 shares of A for each share they hold. Since A's shares are worth $50, half a share is worth $25. The original value of B's shares is $20, so the increase in value is $25 - $20 = $5. The percentage increase is ($5 / $20) * 100% = 25%.

Suppose That the Market Price of Company a Is $50