Tiger's is merging with Lion's.Tiger's has debt with a face value of $80 and Lion's has debt with a face value of $50.The pre-merger values of the firms given two economic states with equal probabilities of occurrence are as follows: What will be the combined gain or loss to the bondholders of these two firms if the merger provides no synergy and Lion's stockholders receive stock in the combined firm in an amount equal to the stand-alone value of Lion's?
A)$0
B)$25
C)−$5
D)$5
E)$10

Question

Tiger's is merging with Lion's.Tiger's has debt with a face value of $80 and Lion's has debt with a face value of $50.The pre-merger values of the firms given two economic states with equal probabilities of occurrence are as follows:  What will be the combined gain or loss to the bondholders of these two firms if the merger provides no synergy and Lion's stockholders receive stock in the combined firm in an amount equal to the stand-alone value of Lion's?
A)$0 
B)$25 
C)−$5 
D)$5 
E)$10

Quizplus · Accepted Answer

The Answer of Tiger's is merging with Lion's.Tiger's has debt with a face value of $80 and Lion's has debt with a face value of $50.The pre-merger values of the firms given two economic states with equal probabilities of occurrence are as follows:  What will be the combined gain or loss to the bondholders of these two firms if the merger provides no synergy and Lion's stockholders receive stock in the combined firm in an amount equal to the stand-alone value of Lion's?
A)$0 
B)$25 
C)−$5 
D)$5 
E)$10

Tiger's Is Merging with Lion's