Q1. What is the current stock market valuation of Creative Computers and of Ubid based on the stock prices as of December 9?

Creative Computers

$22.75* 10,238,703

=$232,930,493.25

Ubid

$35.6875* 9,146,883

=$326,429,387.0625

• Stock market valuation equals to stock price times shares outstanding

Q2. Calculate the market value of Ubid shares owned by Creative Computers as of December 9.

Creative Computers owns 80%

The market value= total market value of Ubid shares times 80%

= $326,429,387.0625*0.8

= $261,143,509.65

Q3. Given your answers to Q1 and Q2, can you conclude that the prices of Creative Computers and Ubid are not consistent with the arbitrage principle? Why or why not?