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Consider the following two merger candidates. The merger is for diversification purposes only with no synergies involved. Risk-free rate is 4%. Market value of
Consider the following two merger candidates. The merger is for diversification purposes only with no synergies involved. Risk-free rate is 4%. Market value of assets Face value of zero coupon debt Debt maturity Asset return standard deviation Company A $500 $500 4 years 50% The asset return standard deviation for the combined firm is 20%. How much more value will debtholders collectively receive after the merge(keep two decimal places)?
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