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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%. The asset return standard

Consider the following two merger candidates. The merger is for diversification purposes only with no synergies involved. Risk-free rate is 4%. 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)?

Market value of assets

$900

$500

Face value of zero coupon debt

$900

$500

Debt maturity

4 years

4 years

Asset return standard deviation

50%

50%

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