Goodday Is Merging with Bakers

Goodday is merging with Bakers.Goodday has debt with a face value of $80 and Baker has debt with a face value of $40.Bakers' stockholders receive stock in the combined firm in an amount equal to the stand-alone market value of Bakers.The pre-merger values of the firms given two economic states with equal probabilities of occurrence are as follows: What will be the gain or loss to the current shareholders of Goodday if the merger provides no synergy?

A) −$10
B) $0
C) −$5
D) $5
E) $10

Correct Answer:

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