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Company A considers acquiring company B. Shares of the company A trade at $30 and there are 5,000 of A shares outstanding. Company B has 200 shares outstanding worth $100 each. If A acquires B, then the resulting synergy will amount to $10,000. Suppose A offers to exchange every B's share for four shares in the merged company. What will be the total benefit for the existing shareholders of A?

Company A considers acquiring company B. Shares of the company A trade at $30 and there are 5,000 of A shares outstanding. Company B has 200 shares outstanding worth $100 each. If A acquires B, then the resulting synergy will amount to $10,000. Suppose A offers to exchange every B's share for four shares in the merged company. What will be the total benefit for the existing shareholders of A?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Company A considers acquiring company B. Shares of the company A trade at $30 and there are 5,000 of A shares outstanding. Company B has 200 shares outstanding worth $100 each. If A acquires B, then the resulting synergy will amount to $10,000. Suppose A offers to exchange every B's share for four shares in the merged company. What will be the total benefit for the existing shareholders of A?
Transcribed Image Text:Company A considers acquiring company B. Shares of the company A trade at $30 and there are 5,000 of A shares outstanding. Company B has 200 shares outstanding worth $100 each. If A acquires B, then the resulting synergy will amount to $10,000. Suppose A offers to exchange every B's share for four shares in the merged company. What will be the total benefit for the existing shareholders of A?
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