Question $1(2$ points$)$ Retake question

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

Company A

Market value of assets

$$900$

Face value of zero coupon debt

$$900$

Debt maturity

$4$ years

Asset return standard deviation

$50\%$

Company B

Marjet value of assets

$$400$

Face value of Zero Coupon debt

$$400$

Debt maturity

$4$ Years

Asset return standard deviation

$50\%$

The asset return standard deviation for the combined firm is $20\%.$ How much mc value will debtholders collectively receive after the merge$($keep two decimal plac

Your Answer: