CORPORATE FINANCE- Mergers and acquisitions

Friendbook announced its intention to acquire Whatsup on April 3, 2020. Friendbook has 5,500 shares outstanding and Whatsup has 2,000 shares outstanding.

a) What is the implied value of the expected synergies given the market reaction? (Note: the only information that is released on April 3 is the news regarding the acquisition and the market is sure that the deal will go through.)

b) Friendbook wants to offer Whatsup shareholders X shares in the combined firm for every share they currently hold. What is X such that the NPV of the deal to Friendbook shareholders is 40,000 USD?

c) Calculate the stock returns on announcement day for Friendbook and Whatsup. Which firms shareholders (seen as a whole) capture more of the merger gains?

d) Assume the situation is different than described in sub question a). Specifically, there is a high chance that antitrust authorities will not clear the merger. Therefore, the market thinks that there is only a 25% chance that the deal will actually go through. Does this information affect your estimate of the expected synergies? If so, how?

e) After a few weeks, Friendbook withdraws its offer to acquire Whatsup. Do the share prices of Friendbook and Whatsup necessarily fall back to their April 2nd values? Explain.