Suppose That the Market Price of Company a Is $50

Multiple Choice

Suppose that the market price of Company A is $50 per share and that of Company B is $20. If A offers half a share of common stock for each share of B, what is the percentage increase in wealth for B's shareholders? (Assume that the offer has no effect on the value of A's shares.)

A) −20 percent
B) +25 percent
C) −25 percent
D) +20 percent