Question 1.A

Firm As market cap is $60 million, and firm Bs market cap is $10 million. Firm A offers to buy Firm B at $14 million. Firm A expects the synergy benefit to be $10 million. Which of the following is correct?

	a.	If its a cash offer, market value of the combined company post-merger will be $66 million.
	b.	If its an equity swap, market value of the combined company post-merger will be $76 million.
	c.	If its an equity swap, market value of the combined company post-merger will be $84 million.
	d.	If its a cash offer, market cap of the combined company post-merger will be $76 million.

Question 1.B

Following question 4, which of the following is not true?

	a.	Firm A didnt overpay for firm B because the synergy benefit exceeds the premium paid.
	b.	The maximum A can offer should be $20 million.
	c.	Based on the offer, it seems that Bs shareholders has obtained 60% of the expected synergy benefit.
	d.	If its an equity swap, As original shareholders will own 66/80 of the post-merger company.