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Value per share of the merged firm

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Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 2,300 shares of stock outstanding at a market price of $20 a share. Firm B has 1,800 shares outstanding at a price of $15 a share. What is the value per share of the merged firm?

A. $19.00
B. $19.18
C. $19.44
D. $20.00
E. $20.33

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Solution Summary

Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 2,300 shares of stock outstanding at a market price of $20 a share. Firm B has 1,800 shares outstanding at a price of $15 a share. What is the value per share of the merged firm?

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Let us first find the combined market cap after the merger:

The pre merger market cap of Firm A= 2300*20=46000

The pre merger market cap of Firm B= 1800*15= 27000

Total Post Merger Market Cap= 46000+27000=73000 dollars

Now, since it is ...

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Sandeep Bardia, MBA
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  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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