(1) A bidding firm, A, is worth $27,000 as a stand-alone entity. A target firm, B, is worth $12,000 as a stand-alone entity, but $18,000 if it is acquired and integrated with Firm A. Several other firms are interested in acquiring Firm B, and Firm B is also worth $18,000 if it is acquired by these other firms. If A acquired B, would this acquisition create value? If yes, how much? How much of this value would the equity holders of A receive? How much would the equity holders of B receive?

(a) Considering the same scenario as in A, except that the value of B if it is acquired by the other firms interested in it, is only $12,000.

(b) Consider the same scenario as in A, except that the value of B if it is acquired by the other firms interested in it, is $16,000.