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In this question why has the examiner used total firm value to calculate avg asset beta instead of the total equity value?
And Isn’t synergy= Total value of combined equity – value of combined equity pre acquisition?
So why total firm values have been used?
Hi John,
Please I don’t understand the additional debt needed to acquire Fodder.
Total value of Fodder plus debt obligations is $49,116,500.
If $20m is used to cover part of it, I thought the remainder of $29,116.5 should be sought for. Thank youAmer: The question specifically says:
“It can be assumed that the asset beta of the combined company is the weighted average of the individual companies’ asset betas, weighted in proportion of the individual companies’ market value.”
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