Racing Motors has a market value of $210,000.PJ Racing has 20,000 shares of stock outstanding at a price per share of $40.PJ Racing is acquiring Racing Motors in an exchange for 5,625 shares of PJ Racing stock.The merger is expected to create $30,000 of synergy.The post-merger value of the firm will be ____ and the post-merger price per share will be ____.
A)$815,000;$40.75
B)$815,000;$31.80
C)$1,040,000;$40.75
D)$1,040,000;$52.00
E)$1,040,000;$40.59

Question

Quizplus · Accepted Answer

Number of post-merger shares = 20,000 + 5,625 = 25,625 sharesV_AB = (20,000 × $40)+ $210,000 + $30,000 = $1,040,000Post-merger share value = $1,040,000/25,625 = $40.59

Racing Motors Has a Market Value of $210,000