5. The following data on a merger are given:

Firm A Firm B FirmAB

Price per Share $100 $10

Total Earnings $500 $300

Shares outstanding 100 40

Total Value $10,000 $400 $11,000

Firm A has proposed to acquire Firm Bs shares at a price of $20 per share for Firm B.

a) Calculate the gain from the acquisition.

$600

$150

$550

$700

b) Calculate the NPV_A of the acquisition.

$200

$400

$600

$150