Firms A and B are each worth $50 million,but generate a $20 million gain when merged.If the cost of the merger was $5 million,how much did firm A pay for firm B?
A) $50 million
B) $55 million
C) $60 million
D) $65 million

Question

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Firm A and B together are worth $100 million ($50 million each). The merger generates a $20 million gain, making the combined value $120 million. After subtracting the $5 million merger cost, the net value is $115 million. Firm A pays $55 million for firm B to account for the $50 million value of firm B plus half of the $20 million gain ($10 million), minus the $5 million cost.

Firms a and B Are Each Worth $50 Million,but Generate