Firms a and B, Both All-Equity Financed, Are Merging

question 65

Multiple Choice

Firms A and B, both all-equity financed, are merging. Prior to merge, Firm A, having 100 shares outstanding, is worth $15,000 while Firm B, with 50 shares outstanding. The combined firm will be worth $30,000. Firm A pays $11,500 in cash for Firm B. What is the net benefit of the merger to Firm A?

• A) $3,500
• B) $5,000
• C) $11,500
• D) $18,500

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