Question

Jennifer’s Boutique has 2,100 shares outstanding at a market price per share of $26. Sally’s has 3,000 shares outstanding at a market price of $41 a share. Neither firm has any debt. Sally’s is acquiring Jennifer’s for $58,000 in cash. The incremental value of the acquisition is $2,500. What is the value of Jennifer’s Boutique to Sally’s?a. $26,000b. $27,600c. $57,100d. $58,200e. $60,500

Answer 1

Answer:

c. $57,100

Explanation:

The computation of the value of Jennifer’s Boutique to Sally is shown below:

= (Number of shares outstanding ×  market price per share) + (incremental value of the acquisition)

= 2,100 shares ×$26 + $2,500

= $54,600 + $2,500

= $57,100

We simply find out the market value and then added it to the incremental value of the acquisition

All other information which is given is not relevant. Hence, ignored it