Raphael Ltd acquired all 2,400,000 shares in Alec Ltd on 1 April 2024. As part of the purchase consideration, the shareholders of Alec Ltd were offered $0.8 in cash for every four Alec Ltd shares, plus four Raphael Ltd shares for every six Alec Ltd shares. At the date of acquisition, the share price of Alec Ltd and Raphael Ltd were $2.1 and $8.6, respectively.

What is the total purchase consideration?

Round your answer to the nearest whole number and do NOT include any symbols in your answer (e.g. $ , . ;).

Question

Raphael Ltd acquired all 2,400,000 shares in Alec Ltd on 1 April 2024. As part of the purchase consideration, the shareholders of Alec Ltd were offered $0.8 in cash for every four Alec Ltd shares, plus four Raphael Ltd shares for every six Alec Ltd shares. At the date of acquisition, the share price of Alec Ltd and Raphael Ltd were $2.1 and $8.6, respectively.

What is the total purchase consideration?

Round your answer to the nearest whole number and do NOT include any symbols in your answer (e.g. $ , . ;).

BlackTom AI · Accepted Answer

We begin by restating the given data to structure the calculation. Raphael Ltd acquires Alec Ltd with a mixed consideration: cash and stock.
First, compute the cash component. The offer provides $0.8 in cash for every four Alec shares. Thus, cash per Alec share = 0.8 / 4 = 0.2. With 2,400,000 Alec shares, the total cash component = 2,400,000 × 0.2 = 480,000.
Next, determine the stock component. For every six Alec shares, four Raphael shares are issued. So Raphael shares per Alec share = 4/6 = 2/3. Total Raphael shares issued = 2,400,000 × (2/3) = 1,600,000 shares.
 valued at the acquisition date: Raphael share price is $8.6. Therefore, value of stock component = 1,600,000 × 8.6 = 13,760,000.
Now combine components to obtain the total purchase consideration. Sum the cash component with the stock component: 480,000 + 13,760,000 = 14,240,000.
A cross-check idea: the cash per Alec share (0.2) plus the implied stock value per Alec share (13,760,000 / 2,400,000 ≈ 5.7333) would total roughly 5.9333 per Alec share in value, consistent with the composition of the offer. The rounding instruction asks for the nearest whole number and to remove symbols, which aligns with the computed total of 14,240,000.

22320 Accounting for Business Combinations - Autumn 2025 Quiz 1 (Workshop 02 - 6pm)

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