The Chocolate Ice Cream Company and the Vanilla Ice Cream Company have agreed to merge and form Fudge Swirl Consolidated. Both companies are exactly alike except that they are located in different towns. The end-of-period value of each firm is determined by the weather, as shown below. There will be no synergy to the merger.

State	Probability			Value
Rainy	.1			$	280,000
Warm	.4				460,000
Hot	.5				920,000

The weather conditions in each town are independent of those in the other. Furthermore, each company has an outstanding debt claim of $460,000. Assume that no premiums are paid in the merger. a. What are the possible values of the combined company? (Do not round intermediate calculations.)

Possible states	Joint Value
Rain-Rain	$	560000 Correct
Rain-Warm		740000 Correct
Rain-Hot		1200000 Correct
Warm-Warm		920000 Correct
Warm-Hot		1380000 Correct
Hot-Hot		1840000 Correct

b. What are the possible values of end-of-period debt and stock after the merger? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations.)

	Debt Value		Stock Value
Rain-Rain	$	Not attempted	$	0 Correct
Rain-Warm		Not attempted		0 Correct
Rain-Hot		Not attempted		280000 Correct
Warm-Warm		Not attempted		0 Correct
Warm-Hot		Not attempted		460000 Correct
Hot-Hot		Not attempted		920000 Correct

c. How much do stockholders and bondholders each gain or lose if the merger is undertaken? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations.)

Bondholder gain/loss	$	Not attempted
Stockholder gain/loss	$	Not attempted