Question

Sue's Bakery is planning on merging with Ted's Deli. Sue's will pay Ted's shareholders the current value of their stock in shares of Sue's Bakery. Sue's currently has 6,500 shares of stock outstanding at a market price of $26 a share. Ted's has 2,300 shares outstanding at a price of $18 a share. What is the value of the merged firm if the synergy created by the merger is $3,200

Answer 1

Answer:

The value of the merged firm if the synergy created by the merger is $3,200 is $213,600

Explanation:

In order to calculate the value of the merged firm if the synergy created by the merger is $3,200 we would have to calculate the following formula:

value of the merged firm=(shares of stock outstanding*market price) + (teds shares*price) + $3,200

value of the merged firm=(6,500*$26) + (2,300*$18) + $3,200

value of the merged firm=$213,600

The value of the merged firm if the synergy created by the merger is $3,200 is $213,600