Tiger's is merging with Lion's. Tiger's has debt with a face value of $80 and Lion's...

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Tiger's is merging with Lion's. Tiger's has debt with a face value of $80 and Lion's has debt with a face value of $50. The pre-merger values of the firms given two economic states with equal probabilitie. of occurrence are as follows: Pre-merger Values Tiger's: Assets Debt Equity Lion's: Assets Debt Equity State 1 $ 130 80 50 $ 30 30 0 State 2 $ 50 50 0 $ 90 50 40 Market Value $ 90 65 25 $ 60 40 20 What will be the combined gain or loss to the bondholders of these two firms if the merger provides no synergy and Lion's stockholders receive stock in the combined firm in an amount equal to the stand- alone value of Lion's? Tiger's is merging with Lion's. Tiger's has debt with a face value of $80 and Lion's has debt with a face value of $50. The pre-merger values of the firms given two economic states with equal probabilitie. of occurrence are as follows: Pre-merger Values Tiger's: Assets Debt Equity Lion's: Assets Debt Equity State 1 $ 130 80 50 $ 30 30 0 State 2 $ 50 50 0 $ 90 50 40 Market Value $ 90 65 25 $ 60 40 20 What will be the combined gain or loss to the bondholders of these two firms if the merger provides no synergy and Lion's stockholders receive stock in the combined firm in an amount equal to the stand- alone value of Lion's?

Answer rating: 100% (QA)

First lets calculate the postmerger market values of the combined firms assets debt and equity for b... View the full answer