On 1 July 2018, Rebecca Ltd acquired all 1,500,000 shares in Russ Ltd. As part of the purchase consideration, the shareholders of Russ Ltd were offered $1.20 in cash for every five Russ Ltd shares, plus six Rebecca Ltd shares for every three Russ Ltd shares. At the date of acquisition, the share price of Russ Ltd and Rebecca Ltd were $0.80 and $1.80, 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

On 1 July 2018, Rebecca Ltd acquired all 1,500,000 shares in Russ Ltd. As part of the purchase consideration, the shareholders of Russ Ltd were offered $1.20 in cash for every five Russ Ltd shares, plus six Rebecca Ltd shares for every three Russ Ltd shares. At the date of acquisition, the share price of Russ Ltd and Rebecca Ltd were $0.80 and $1.80, 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

Cash consideration per Russ share = 1.20 / 5 = 0.24.  
Share exchange ratio: 6 Rebecca shares for every 3 Russ shares = 6/3 = 2 Rebecca shares per 1 Russ share.  
Value of Rebecca shares given per Russ share = 2 × 1.80 = 3.60.

Relevant knowledge points and concepts
- Total purchase consideration equals the sum of cash paid and the market value of shares issued as consideration.  
- Ratios must be converted to a per-target-share basis to compute value per acquired share.  
- Multiply per-share consideration by the number of shares acquired.

Step-by-step reasoning and intermediate calculations
1. Cash element per Russ share: 1.20 cash for every 5 Russ shares → 1.20 / 5 = 0.24 per share.  
2. Share element per Russ share: 6 Rebecca shares for every 3 Russ shares → 6/3 = 2 Rebecca shares per Russ share. Rebecca share price = 1.80, so value = 2 × 1.80 = 3.60 per Russ share.  
3. Total consideration per Russ share = cash element + share element = 0.24 + 3.60 = 3.84.  
4. Total shares acquired = 1,500,000. Total purchase consideration = 1,500,000 × 3.84.

Multiplication (intermediate arithmetic):
- 1,500,000 × 3 = 4,500,000
- 1,500,000 × 0.8 = 1,200,000
- 1,500,000 × 0.04 = 60,000
Sum = 4,500,000 + 1,200,000 + 60,000 = 5,760,000

Why this is correct
Each Russ share effectively entitles its holder to $0.24 in cash plus two Rebecca shares worth $3.60; combining these gives the full economic consideration of $3.84 per share. Multiplying by the total 1,500,000 shares gives the aggregate consideration.

Common mistakes (why alternative answers would be wrong)
- Interpreting 6 for every 3 as 6/5 or another ratio; the correct simplification is 2 Rebecca shares per Russ share.  
- Omitting the cash component or using the wrong share prices would under- or overstate the total.  
- Failing to convert the per-5-share cash into a per-share amount leads to incorrect per-share totals.

Conclusion
Total purchase consideration = 5,760,000, which matches the provided answer.

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