Firm B is willing to be acquired by firm A at a price of $34 a share in either cash or stock

Finance Apr 01, 2021

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?

Expert Solution

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.

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