TargetCorp.shareholders will be receiving 6 shares of Acquire Inc.for each 10 shares of TargetCorp.that they own.TargetCorp.'s shares are currently priced at $15 per share while the shares of Acquire are (and will remain)worth $30 per share.What is the dollar premium that Acquire is paying for each 100 shares of TargetCorp?

Question

Quizplus · Accepted Answer

Assume that we own 100 shares of Target
Target value of 100 shares: $1,500
Number of shares of Acquire to be distributed: .6 ´ 100 = 60 shares
Value of 60 new Acquire shares: 60 ´ $30 = $1,800
Premium = $1,800 - $1,500 = $300