Tj's and corner grocery are all-equity firms. tj's has 2,500 shares outstanding at a market price of $16.70 a share. corner grocery has 3,000 shares outstanding at a price of $22.50 a share. corner grocery is acquiring tj's for $45,000 in cash. what is the merger premium per share?

$1.3 per share

Explanation:

Data provided in the question:

Number of shares outstanding of TJ = 2,500

Market price = $16.70

Number of shares outstanding of Corner Grocery = 3,000

Price per share of Corner Grocery = $22.50

Cost of acquiring TJ's share = $45,000

Now,

Merger Premium per share = [ Cost of acquiring TJ's share - Market price of TJ's shares ] ÷ Number shares TJ's outstanding

= [ $45,000 - ( $16.70 × 2,500)] ÷ 2,500

=  [ $45,000 - $41,750 ] ÷ 2,500

= $3,250 ÷ 2,500

= $1.3 per share

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explanation:

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