On January 3rd, 2019, Bristol Myers Squibb agreed to buy Celgene. The deal calls for Celgene stockholdersto receive $50 per share in cash plus one share of Bristol Myers Squibb stock for each share of Celgenestock. Celgene stock had been trading at $65 pre-merger but jumped to $90 per share after the mergerannouncement. Bristol Myers Squibb has been trading at $50 per share since the merger wasannounced.

John Simpleton owns Celgene stock in his Keep-It-Simple High Growth portfolio. However, the fund's

prospectus will not allow him to hold Bristol Myers Squibb stock because it is not considered a legitimate high growth stock. Therefore, he can sell his Celgene stock now for $90 or hold it until right before themerger, hoping it will appreciate, and then sell it. Either way, he will avoid holding any Bristol MyersSquibb stock.

If he holds it until right before the merger, he runs the risk the deal is rejected by US regulators or

derailed by activist investors. John estimates there is currently a 20% chance (.20 probability) that the

deal is not completed. If that happens, then the stock price would fall precipitously, but due to the 2.2

billion break-up fee, John estimates Celgene's share price would not fall to its pre-merger price. Instead,it would fall to either $70 per share or $75 per share with equal probabilities. If the merger is completed,then John estimates Bristol Myers Squibb's stock price on merger day will either increase 10% (from itscurrent $50 price) with probability .20, stay the same with probability .3, or decrease 10% withprobability .50. Draw a decision tree.