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Homework answers / question archive / Firm B is willing to be acquired by firm A at a price of $34 a share in either cash or stock
Firm B is willing to be acquired by firm A at a price of $34 a share in either cash or stock. The incremental value of the proposed acquisition is estimated at $80,000.
Firm A Firm B
Number of shares 40000 12000
Price per share $18.00 $31.00
Debt $0 $0
What is the true cost of the acquisition of firm B by firm A in an all-stock deal?
Computation of Value of firm B to Firm A:
Value of firm B to Firm A = Current Market value of B + Incremental value of acquisition
= 12000*31 + 80,000
= $452,000
So, true cost of the acquisition of firm B by firm A in an all-stock deal is $452,000.
