Problem:
Alto and Solo are all-equity firms. Alto has 2,400 shares outstanding at a market price of $24 a share. Solo has 4,000 shares outstanding at a price of $17 a share. Solo is acquiring Alto for $63,000 in cash. The incremental value of theacquisition is $5,500.
Required:
Question 1: What is the net present value of acquiring Alto to Solo?
Note: Please show how you came up with the solution.