Firm A is considering acquiring Firm B. There are 1,000 shares of Firm A stock outstanding and 600 shares of Firm B stock outstanding. Both firms agree on the following data:
PVA = 2,000
PVB = 600
PVAB= 3,000
(a) What is the total synergy gain from this merger?
(b) What is the highest amount of cash that Firm A would be willing to pay to acquire Firm B in a cash acquisition?
(c) What is the highest number of shares that Firm A would be willing to pay to acquire Firm B in a stock acquisition?