Bentley Corp. and Rolls Manufacturing are considering a merger. The possible states of the economy and each

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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?

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...

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

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Corporate Finance

ISBN: 978-0077861759

10th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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Question Posted: Dec 08, 2011 10:59 AM

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Bentley Corp. and Rolls Manufacturing are considering a merger. The possible states of the economy and each

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

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