Question
Two companies are merging. Company 1 has a Market Cap of 500,000 and Company 2 has a Market Cap of 250,000. Both companies stocks are
Two companies are merging. Company 1 has a Market Cap of 500,000 and Company 2 has a Market Cap of 250,000. Both companies stocks are currently trading at $2 per share. Company 1 plans to buy Company 2 for a premium of 10% cash over the market cap of Company 2. Once the merger is complete, the combined company will give new shares to shareholders of the individual companies, equal to what they owned before the merger. All previous shares from the individual companies will then be destroyed. What is the new price per share of the combined company?
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