Question

Principal, Inc. is acquiring Secondary Companies for $38,000 in cash. Principal has 4,500 shares of stock outstanding at a market price of $31 a share. Secondary has 1,600 shares of stock outstanding at a market price of $22 a share. Neither firm has any debt. The net present value of the acquisition is $2,400. What is the price per share of Principal after the acquisition

Answer 1

$31.53 Price per share

Step-by-step explanation:

[(4,500 ×$31) + $2,400] / 4,500

=$139,500+$2,400/4,500

=$141,900/4,500

= $31.53

Therefore the price per share of Principal after the acquisition is $31.53 Price per share