Question

Vivo Corporation is acquiring Wizz Company for $2,945,000 in cash. Vivo has 200,000 shares of stock outstanding at a market value of $57.50 a share. Wizz has 70,000 shares of stock outstanding at a market price of $38.60 a share. Neither firm has any debt. The net present value of the acquisition is $181,000. What is the price per share of Vivo after the acquisition?

		$61.37
		$59.72
		$60.93
		$57.86
		$58.41

Answer 1

Market Value of VIVO before acquisition = No of share outstanding*market share price

=200,000*$57.50

= $11,500,000

Market Value of VIVO after acquistion = Market Value of VIVO before acquisition + NPV of acquisition

= $11,500,000 + $181,000

= $11,681,000

Price per share of Vivo after the acquisition = Market Value of VIVO after acquistion/No of share outstanding

=$11,681,000/200,000

= $58.405

So, the price per share of Vivo after the acquisition is $58.41

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