Consider a situation where Com.Dot (a cable company) is planning to acquire Time.EXT (a TV and content provider) through a stock offer. Initial financial and market information on each company is provided in table below. Post-acquisition, Com.Dot expects to realize a positive synergy of approximately $3 billion. The company further expects this acquisition to reduce its overall standard deviation of asset return to .29. The annual risk-free rate is 5%.

1. What is the value of the Com.Dots equity and debt post-acquisition?
2. What are the gains (losses) for Com.Dots shareholders and bondholders, post-acquisitions?

Com.Dot Time.Ext Market value of assets ($ Million) $26,300 $36,400 $25,000 $30,000 Face value of zero-coupon debt ($ Million) maturing in one year Asset return standard deviation 38% .53% Com.Dot Time.Ext Market value of assets ($ Million) $26,300 $36,400 $25,000 $30,000 Face value of zero-coupon debt ($ Million) maturing in one year Asset return standard deviation 38% .53%