Goodday is merging with Bakers.Goodday has debt with a face value of $80 and Baker has debt with a face value of $40.Bakers' stockholders receive stock in the combined firm in an amount equal to the stand-alone market value of Bakers.The pre-merger values of the firms given two economic states with equal probabilities of occurrence are as follows: What will be the gain or loss to the current shareholders of Goodday if the merger provides no synergy?
A)−$10
B)$0
C)−$5
D)$5
E)$10

Question

Goodday is merging with Bakers.Goodday has debt with a face value of $80 and Baker has debt with a face value of $40.Bakers' stockholders receive stock in the combined firm in an amount equal to the stand-alone market value of Bakers.The pre-merger values of the firms given two economic states with equal probabilities of occurrence are as follows:  What will be the gain or loss to the current shareholders of Goodday if the merger provides no synergy?
A)−$10 
B)$0 
C)−$5 
D)$5 
E)$10

Quizplus · Accepted Answer

The Answer of Goodday is merging with Bakers.Goodday has debt with a face value of $80 and Baker has debt with a face value of $40.Bakers' stockholders receive stock in the combined firm in an amount equal to the stand-alone market value of Bakers.The pre-merger values of the firms given two economic states with equal probabilities of occurrence are as follows:  What will be the gain or loss to the current shareholders of Goodday if the merger provides no synergy?
A)−$10 
B)$0 
C)−$5 
D)$5 
E)$10

Goodday Is Merging with Bakers