Question
Exercise 4 [8 Points] Company A is planning to acquire Company B. After the acquisition there will be an estimated cost saving for the merged
Exercise 4 [8 Points] Company A is planning to acquire Company B. After the acquisition there will be an estimated cost saving for the merged company of $80 million. At the moment company A's shares trade for $200 and there are 1,000,000 shares outstanding. Company B's shares trade for 114 each and there are 2,000,000 shares outstanding. The boards of directors of the two companies agree to share the savings equally between the shareholders of the two companies. The acquisition will be paid with shares of company A, and A is planning to issue 2,000,000 new shares. How many shares of company A will B's shareholders receive after the ac- quisition?
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