New Tech has a market value of $384,000.Emerson Electrics has 40,000 shares of stock outstanding at a price per share of $39.Emerson Electrics is acquiring New Tech in exchange for 10,000 shares of Emerson Electrics stock.The merger is expected to create $28,000 of synergy.What is the merger net present value?
A)-$81,000
B)-$10,400
C)$22,400
D)$17,600
E)$46,400

Question

Quizplus · Accepted Answer

Number of post-merger shares = 40,000 + 10,000 = 50,000 sharesV_AB = (40,000 × $39)+ $384,000 + $28,000 = $1,972,000Post-merger share value = $1,972,000/50,000 = $39.44Cost of acquisition = 10,000 × $39.44 = $394,400Merger NPV = $384,000 + 28,000 - 394,400 = $17,600

New Tech Has a Market Value of $384,000