This workout says using the assumptions below Calculate the exchange ratio and the number of new shares to be issued in the transaction Well our equity financing is 100% and we've got SG&A synergies of 2,000 The current share price for the target is what we're interested in And the acquisition premium is 40% and diluted shares outstanding are 1,200 So we firstly need to calculate the equity purchase price which is going to be the 15.6 Times by one plus the 40% premium All then times by the number of shares and that will give us our equity purchase price of 26,208 However if I'm going to pay for that using shares, I need to workout how many shares are issued So I'll take the equity purchase price and divide it now by the buyers share price So the number of shares they're going to issue is 1,294.2 Great! So that's the number issued, how many are being purchased? Well the target has 1,200 shares at the moment So if we take the new shares issued and divide them by the 1,200 shares of the target That gives us our exchange ratio and that tells us they're are going to be 1.1 new shares for every old share issued If we show another decimal place, we can see it's actually 1.08 and we could get more and more accurate