Exchange Ratio Calculator
This calculator is designed for financial analysts and professionals involved in mergers and acquisitions to compute the exchange ratio based on input stock values.
Results
Data Source and Methodology
All calculations are based strictly on formulas and data provided by authoritative sources in the finance industry.
The Formula Explained
The exchange ratio is calculated as follows:
Exchange Ratio = \frac{\text{Target Share Price}}{\text{Bidder Share Price}}
Glossary of Variables
- Bidder Share Price: The price of one share of the bidder company.
- Target Share Price: The price of one share of the target company.
- Exchange Ratio: The number of shares of the bidding company offered for each share of the target company.
How It Works: A Step-By-Step Example
For example, if the bidder's share price is $50 and the target's share price is $45, the exchange ratio is calculated as 0.90, meaning 0.90 shares of the bidder for each share of the target.
Frequently Asked Questions (FAQ)
What is an exchange ratio?
The exchange ratio determines how many shares of the acquiring company are offered for each share of the target company.
Why is the exchange ratio important?
It affects the valuation of the merger and the ownership distribution in the new entity.
How do I ensure accurate input data?
Use the latest stock prices from a reliable financial service.