Mayo Corporation is currently trading at $30 per share. There are 10 million shares outstanding, and the company has no debt. You believe that the value of the company would increase by 50% if the management team was replaced. How much would you need to offer in total to acquire 50% of Mayo's shares?

Question

Quizplus · Accepted Answer

To acquire 50% of the shares, you would need to purchase 5 million shares. If the value of the company increases by 50%, the new share price would be $45 per share. Therefore, the total cost to acquire 5 million shares would be:

5 million shares x $45 per share = $225 million

Therefore, the correct choice is C) $150 million as this is not the total cost to acquire all shares, but only 50% of the shares.

Mayo Corporation Is Currently Trading at $30 Per Share