Question
To determine cost of acquisition: Wage Ltd., a firm in the alcohol manufacturing industry intends to acquire Karim Ltd., a beer distributing firm. In a
To determine cost of acquisition:
Wage Ltd., a firm in the alcohol manufacturing industry intends to acquire Karim Ltd., a beer distributing firm. In a press release, Wage Ltd. outlines the terms of the merger, which specify that Karim Ltd.s shareholders will each receive 0.90 share of Wage Ltd. owned. Karim Ltd. has 1,000,000 share outstanding. On the day of the merger announcement, Wage Ltd.s share closed at US. 20 and Karim Ltd. share closed at US. 15. Samuel Richardson is an individual investor who owns 500 shares of Karim Ltd.
Required:
1. Determine the cost of the acquisition for Karim Ltd based on the current share price.
2. Determine the number and value of shares of Karim Ltd. that Samuel Richardson would receive base on the current share price.
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