Question

John’s shop has 700 shares outstanding at a market price per share of $17. Sam’s has...

John’s shop has 700 shares outstanding at a market price per share of $17. Sam’s has 300 shares outstanding at a market price of $35 a share. Neither firm has any debt. Sam’s is acquiring John’s for $27,000 in cash. What is the merger premium per share?


Red’s, Inc. and Bed’s, Inc. are all-equity firms. Red’s has 3,700 shares outstanding at a market price of $14 a share. Bed’s has 500 shares outstanding at a price of $18 a share. Bed’s is acquiring Red’s for $65,000 in cash. The incremental value of the acquisition is $4,800. What is the value of Red’s Inc. to Bed’s?

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