Jennifer's Boutique has 2,100 shares outstanding at a market price per share of $26.Sally's has 3,000 shares outstanding at a market price of $41 a share.Neither firm has any debt.Sally's is acquiring Jennifer's for $58,000 in cash.The incremental value of the acquisition is $2,500.What is the value of Jennifer's Boutique to Sally's?

Question

Quizplus · Accepted Answer

To calculate the value of Jennifer's Boutique to Sally's, we first need to find the market value of Jennifer's Boutique:

Market value of Jennifer's Boutique = 2,100 shares x $26 per share = $54,600

Since Sally's is acquiring Jennifer's Boutique for $58,000, we know there is an incremental value of $2,500.

Incremental Value = Acquisition Value - Market Value 
$2,500 = Acquisition Value - $54,600 
Acquisition Value = $57,100

Therefore, the value of Jennifer's Boutique to Sally's is $57,100.

Jennifer's Boutique Has 2,100 Shares Outstanding at a Market Price