1.Firm A, with a total market share of $100 million, is planning to acquire Firm B, which has total market value of $30 million. Firm A estimates that the merged firm will be worth $150 million as a result of operating and other efficiencies. Firm A's investment bankers have advised that Firm A will have to pay a $12 million premium in price to acquire Firm B. Merger-related costs and expenses will amount to $2 million.

a.What is the net advantage to merging (NAM)?

b.Is there any synergistic value created?

c.Which firm gains or losses in this merger?

d.Which firm benefited from this merger?

2.An acquisition target currently has $10 million shares outstanding. They are trading at $30. This gives the target a current market value of $300 million. What is the premium paid if the target is acquired at $48 per share?