Netaf is a public firm that specializes in advanced irrigation techniques. Current shareholders receive an acquisition offer from Taxcam which has a market cap of $2B as compared to Netaf market cap of $1B. For simplicity assume there are no synergies so the merged firm value will be $3B. Based on historical data we estimate the market return next year to be 10% with a standard deviation of 15%. The risk-free rate is 2%. We assume that the CAPM holds.

The standard deviation of Netaf is 40% and of Taxcam 30%. When we regress Netaf and Taxcam share prices on the market we find that the error terms (epsilons) are uncorrelated. What would be standard deviation of the merged firm?