Consider the following two companies, Acquisitive Corp (AC) and Target Corp (TC). The relevant information to undertake an option-based valuation of their equity is provided below:

AC (TC) has a market value of assets of $20 million ($10 million). AC (TC) has debt of repayment value of $6 million ($4 million) maturing in 10 years. The standard deviation of asset returns of AC (TC) is 60% (70%). The risk free rate is 2.50%.

AC and TC are proposing to merge to form the ATC Corp. There are some synergies to the merger and as a result of these synergies the market value of the combined firm is $32 million. Further, the risk of the firm is substantially reduced to a standard deviation of assets returns of 25%.

15) If the proposed merger went through, the market value of equity of ATC Corp would be _____ million.

A) $22.417

B) $24.385

C) $20

D) $26

E) None of the above