Asked by Summer Bourbon on May 31, 2024
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Firm A is being acquired by Firm B for $40,000 worth of Firm B stock. The incremental value of the acquisition is $2,100. Firm A has 1,900 shares of stock outstanding at a price of $20 a share. Firm B has 2,500 shares of stock outstanding at a price of $40 a share. What is the value per share of Firm B after the acquisition?
A) $39.96
B) $39.98
C) $40.00
D) $40.03
E) $40.05
Incremental Value
The additional value generated by undertaking a specific action or project, compared to not doing so.
Value Per Share
The monetary worth assigned to a single share of stock, based on the company's total valuation divided by the number of outstanding shares.
Equity-Financed
A method of financing in which a company raises capital through the sale of shares, rather than borrowing through debt.
- Assess the ramifications of mergers and acquisitions on the per-share value of acquiring and acquired corporations.
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Learning Objectives
- Assess the ramifications of mergers and acquisitions on the per-share value of acquiring and acquired corporations.
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