Hanover Tires Is Being Acquired by Better Tires for $89,000

question 79

Multiple Choice

Hanover Tires is being acquired by Better Tires for $89,000 worth of Better Tires stock.Hanover Tires has 2,500 shares of stock outstanding at a price of $36 a share.Better Tires has 6,000 shares outstanding with a market value of $23 a share.The incremental value of the acquisition is $4,200.How many new shares of stock will be issued to complete this acquisition?

• A)2,472 shares
• B)3,016 shares
• C)3,133 shares
• D)3,870 shares
• E)3,987 shares

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Definitions:

Proportional

A relationship or ratio between two quantities where they change at the same rate.

Tax Rate

The proportion of income that a person or business must pay in taxes.

Digressive

Characteristics of a process or system that decreases in intensity or rate as it progresses.

Social Security (FICA) Tax

A mandatory payroll tax funded by both employers and employees to finance Social Security benefits.