SBC Corporation is acquiring the CCT Corporation. Neither firm has any debt outstanding. SBC has 200 million shares of stock outstanding with a market price of $20 per share. CCT has 90 million shares of stock outstanding with a market price of $12 per share. SBCs advisors estimate the value of synergy today to be $150 million.

a. What is the estimated market value of the combined companies? (2 points)

b. Suppose SBC pays $1.2 billion in cash to buy 100 percent of the common stock of CCT. What is the NPV of the merger? (5 points)

c. If SBC offers 22% of the combined company to CCTs shareholders, what is the NPV of the merger? (5 points)