Question: Bentley Corp. and Rolls Manufacturing are considering a merger. The possible states of the economy and each companys value in that state are shown here:

Bentley Corp. and Rolls Manufacturing are considering a merger. The possible states of the economy and each companys value in that state are shown here:

a) What is the value of each company before the merger?

b) What are the values of each company’s debt and equity before the merger?

c) If the companies continue to operate separately, What is the total value of the companies? What are the total value of the equity and the total value of the debt?

d) What would be the value of the merged company? What would be the value of the mergerd comp debt and equity?

e) Suppose that the face value of Bentley’s debt was $90,000. Would this affect the transfer of wealth?

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Given information Particulars Probability Bentley Rolls Boom 07 280000 250000 Recession 03 100000 70... View full answer

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