The following data on a merger is given: $$\begin{array} { l c l l }
& \text { Firm A } & \text { Firm B Firm AB } \
\text { Price per share } & \$ 100 & \$ 10 & \
\text { Total earnings } & \$ 500 & \$ 300 & \
\text { Shares outstanding } & 100 & 40 & \
\text { Total value } & \$ 10,000 & \$ 400 & \$ 11,000
\end{array}$$
Firm A has proposed to acquire Firm B at a price of $20 per share for Firm B's stock.Calculate the gain from the merger.
A)$600
B)$150
C)$550
D)$700

Question

The following data on a merger is given: $$\begin{array} { l c l l } 
& \text { Firm A } & \text { Firm B Firm AB } \
\text { Price per share } & \$ 100 & \$ 10 & \
\text { Total earnings } & \$ 500 & \$ 300 & \
\text { Shares outstanding } & 100 & 40 & \
\text { Total value } & \$ 10,000 & \$ 400 & \$ 11,000
\end{array}$$
Firm A has proposed to acquire Firm B at a price of $20 per share for Firm B's stock.Calculate the gain from the merger.
A)$600
B)$150
C)$550
D)$700

Quizplus · Accepted Answer

The gain from the merger is the difference between the total value of the merged firm and the sum of the total values of the two firms before the merger. The total value of the merged firm is $11,000. The total value of Firm A before the merger is $10,000. The total value of Firm B before the merger is $400. Therefore, the gain from the merger is $11,000 - $10,000 - $400 = $600.

The Following Data on a Merger Is Given Firm a Has Proposed to Acquire Firm B at a l