Question
Bentley Corp. and Rolls Manufacturing are considering a merger. The possible states of the economy and each companys value in that state are shown here:
| Bentley Corp. and Rolls Manufacturing are considering a merger. The possible states of the economy and each companys value in that state are shown here: |
| State | Probability | Bentley | Rolls | |||||
| Boom | .70 | $ | 306,000 | $ | 276,000 | |||
| Recession | .30 | 118,000 | 88,000 | |||||
| Bentley currently has a bond issue outstanding with a face value of $133,000. Rolls is an all-equity company. |
| a. | What is the value of each company before the merger? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) |
| b. | What are the values of each companys debt and equity before the merger? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) |
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Intermediate Accounting
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,
10th Canadian Edition, Volume 1
978-0176509736
