Firm A is planning on merging with Firm B.Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A because no synergy will be created.Firm A currently has 3,000 shares of stock outstanding at a market price of $15 a share.Firm B has 1,000 shares outstanding at a price of $10 a share.What is the value of the merged firm?
A)$25,000
B)$45,000
C)$55,000
D)$60,000
E)$50,000

Question

Quizplus · Accepted Answer

In order to calculate the value of the merged firm, we need to first find the total value of Firm A and Firm B separately.

Total value of Firm A = 3,000 shares x $15 per share = $45,000
Total value of Firm B = 1,000 shares x $10 per share = $10,000

Then, we add the two values together to find the value of the merged firm:

$45,000 + $10,000 = $55,000

Therefore, the correct answer is (C) $55,000.

Firm a Is Planning on Merging with Firm B