Atmosphere,Inc.has offered $860 million cash for all of the common stock in ACE Corporation.Based on recent market information,ACE is worth $710 million as an independent operation.For the merger to make economic sense for Atmosphere,what would the minimum estimated value of the enhancements from the merger have to be?

Question

Quizplus · Accepted Answer

To determine the minimum estimated value of enhancements from the merger, we need to find the difference between the amount Atmosphere is offering to pay for ACE and the current market value of ACE as an independent operation.

Minimum estimated value of enhancements = Offer price - Current market value
= $860 million - $710 million
= $150 million

Therefore, the minimum estimated value of enhancements from the merger would have to be at least $150 million for it to make economic sense for Atmosphere. The best choice is C.