George's Equipment Is Planning on Merging with Nelson Machinery

question 6

Multiple Choice

George's Equipment is planning on merging with Nelson Machinery. George's will pay Nelson's shareholders the current value of their stock in shares of George's Equipment. George's currently has 4,600 shares of stock outstanding at a market price of $31 a share. Nelson's has 1,600 shares outstanding at a price of $38 a share. What is the value per share of the merged firm assuming there is no synergy?

• A) $30.77
• B) $31.00
• C) $31.29
• D) $31.74
• E) $32.06

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Definitions:

World Price

The international market price at which goods, services, or commodities are bought and sold.

Multilateral Approach

A strategy involving multiple countries working together on a particular issue or project.

Unilateral Approach

A strategy or policy decision made by one state, party, or organization independently from others.

Gains From Trade

The net benefits that entities receive from voluntary trading with each other, often leading to an improvement in overall welfare.