Firm a is considering acquiring firm b there are 1000


Question: Firm A is considering acquiring Firm B. There are 1,000 shares of Firm A stock outstanding and 600 shares of Firm B stock outstanding. Both firms agree on the following data:

PVA = 2,000

PVB = 600

PVAB= 3,000

(a) What is the total synergy gain from this merger?

(b) What is the highest amount of cash that Firm A would be willing to pay to acquire Firm B in a cash acquisition?

(c) What is the highest number of shares that Firm A would be willing to pay to acquire Firm B in a stock acquisition?

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Finance Basics: Firm a is considering acquiring firm b there are 1000
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