Question

Consider a potential merger between two hypothetical beer companies. Prior to the merger, the first, Ann Hy, is worth $150 billion and the second, Czar Bosch, is worth $100 billion. If they merge, they will gain $30 billion in increased value from reduced costs and additional sales (in present discounted value). Thus the combined value of the new entity (called Ann Hy-Czar Bosch) would be $280 billion. How much more could Czar Bosch hope to get by using the theory of the pie instead of proportional division

Answer 1

$3 billion more

Step-by-step explanation:

Calculation of the amount that Czar Bosch could hope to get by using the theory of the pie instead of proportional division

If we are to use the theory of the pie instead of the proportional division this means that when using the proportional division, their would be likelihood that Czar Bosch would get an amount that is proportional to their market cap, 40% of the $30 billion, or $12 billion and in a situation where the they decide to split the pie this means that Czar Bosch would either get$15 billion or $3 billion more

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