Suppose A offers additional shares to B's shareholders For the offer to have a value of , we must have the following condition:

Solving, we get Notice that if we tried to calculate how many shares at the current market price of are worth , that number would be Thus, A would be offering too many shares if it used the current market price as the benchmark.

In a stock offer, A offers B's shareholders new shares in the combined firm. Suppose has 25 outstanding shares and B has 10 shares outstanding

How many total newly issued shares should it offe to B's shareholders?