A bidding firm, A is worth $30,000 as a stand alone entity. A target firm B, is worth $10,000 as a stand alone entity, but $15,000 if it is acquired and integrated with Firm A. Several other firms are interested in acquiring Firm B, and Firm B is also worth $15,000 if it is acquired by these other firms. If A acquired B, would this acquisition create economic value or "profit" - how much of this value would the equity holders of A receive and how much would the equity holders of B receive?
A. If A acquired B economic value would be created. The equity holders of A would receive 0 value (assuming the acquisition price was $15,000)). The equity holders of the target firm, B, would receive $5000 in equity.
B. If A acquired B economic no value would be created. The equity holders of A would receive 0 value (assuming the acquisition price was $15,000). The equity holders of the target firm, B, would also receive $0 equity.
C. If A acquired B economic value would be created. The equity holders of A would receive $15,000 value (assuming the acquisition price was $15,000). The equity holders of the target firm, B, would receive $5000 in equity.
D. If A acquired B economic value would be created. The equity holders of A would receive $5000 value (assuming the acquisition price was $15,000) The equity holders of the target firm, B, would receive $0 in equity.