Goodday & Sons is being acquired by Baker for £19,000 worth of Baker equity.Baker has 1,500 shares of equity outstanding at a price of £25 a share.Goodday has 1,000 shares outstanding with a market value of £16 a share.The incremental value of the acquisition is £2,000.How many new shares of equity will be issued to complete this acquisition?

Question

Quizplus · Accepted Answer

The incremental value of the acquisition is £2,000. Baker has 1,500 shares of equity outstanding at a price of £25 a share. So, the total value of Baker's equity is £37,500. After the acquisition, the total value of Baker's equity will be £39,500. So, the number of new shares of equity that will be issued is £2,000 / £25 = 80 shares.

Goodday & Sons Is Being Acquired by Baker for £19,000