Homework SoursePlease show work Blue Sox and Red Sox are allequity firms Bl
Please show work
Blue Sox and Red Sox are all-equity firms. Blue Sox has 20,000 shares outstanding at a market price of $15 a share while Red Sox has 45,000 shares outstanding at a price of $31.40 a share. Blue Sox is acquiring Red Sox for $1,620,000 in cash. The incremental value of the acquisition is $302,000. What is the net present value of acquiring Red Sox to Blue Sox?
$167,000
$302,000
$95,000
$128,000
$141,000
| $167,000 | ||
| $302,000 | ||
| $95,000 | ||
| $128,000 | ||
| $141,000 |
Solution
the net present value of acquiring Red Sox to Blue Sox = 45000 * 31.40 + 302,000 - 1,620,000
the net present value of acquiring Red Sox to Blue Sox = 95,000
