Question

Consider the following pre-merger information about a bidding firm (firm b) and a target firm (firm t). Assume that both firms have no debt outstanding.

Firm B:
Shares Outstanding: 6,200
Price per Share: $49

Firm T:
Shares Outstanding: 2,100
Price per Share: $20

Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $9,700.

What is the total value of Firm B after the merger?
1) $303,800
2) $309,800
3) $313,800
4) $319,800

Answer 1

To find the total value of Firm B after the merger, calculate the value of Firm B and the value of the synergistic benefits and then sum them.

Step-by-step explanation:

To find the total value of Firm B after the merger, we need to calculate the value of Firm B and the value of the synergistic benefits.

The value of Firm B is calculated by multiplying the number of shares outstanding by the price per share: 6,200 shares * $49 per share = $303,800.

The total value of Firm B after the merger is the sum of the value of Firm B and the value of the synergistic benefits: $303,800 + $9,700 = $313,500.

Therefore, the correct answer is option 3) $313,800.