Two firms, X and Y have cash flows of $110 or $30 in case of good or bad outcomes, respectively, with probability of 0.5 each. They operate for one period, distribute the cash and close. Each firm's cash flows are independent of those of the other firm. Each firm has debt with face value of $40. Assume zero interest rate and no risk aversion. In case of bankruptcy (which occurs if the available cash is smaller than the face value of the bond) firm X incurs bankruptcy cost of $8 (none for firm Y). (That is, in case of bankruptcy, the firm distributes the cash flow produced minus the bankruptcy cost. These are limited liability companies. The two firms merge and form a new firm, Z. Due to synergy, the sum of their cash flows will rise by $10 in every state. The two firms' bonds remain a liability of firm Z. Firm Z has bankruptcy cost of $10. a. Calculate the values for firm X & Y. b. Calculate the value for firm Z. c. What is (are) the source(s) of the benefit(s) to the total value of the firms from this merger? Write no more than 2 lines. . Two firms, X and Y have cash flows of $110 or $30 in case of good or bad outcomes, respectively, with probability of 0.5 each. They operate for one period, distribute the cash and close. Each firm's cash flows are independent of those of the other firm. Each firm has debt with face value of $40. Assume zero interest rate and no risk aversion. In case of bankruptcy (which occurs if the available cash is smaller than the face value of the bond) firm X incurs bankruptcy cost of $8 (none for firm Y). (That is, in case of bankruptcy, the firm distributes the cash flow produced minus the bankruptcy cost. These are limited liability companies. The two firms merge and form a new firm, Z. Due to synergy, the sum of their cash flows will rise by $10 in every state. The two firms' bonds remain a liability of firm Z. Firm Z has bankruptcy cost of $10. a. Calculate the values for firm X & Y. b. Calculate the value for firm Z. c. What is (are) the source(s) of the benefit(s) to the total value of the firms from this merger? Write no more than 2 lines