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ABC and XYZ are all-equity firms. ABC has 1,750 shares outstanding at a market price of $20 a share while XYZ has 2,500 shares outstanding at a price of $28 a share. ABC is acquiring XYZ for $75,000 in cash. The incremental value of the acquisition is $8,000. What is the net present value of acquiring XYZ to ABC

Respuesta :

Answer:

the net present value is -$32,000

Explanation:

The computation of the net present value is shown below;

= (Number of oustanding shares × market price per share) + incremental value of acquisition - acquiring value in cash

= (1,750 × $20) + $8,000 - $75,000

= $43,000 - $75,000

= -$32,000

Hence, the net present value is -$32,000

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