Question

Pearl, Inc., has offered $578 million cash for all of the common stock in Jam Corporation. Based on recent market information, Jam is worth $533 million as an independent operation. If the merger makes economic sense for Pearl, what is the minimum estimated value of the synergistic benefits from the merger?

Answer 1

$45,000,000

Step-by-step explanation:

Calculation for the minimum estimated value of the synergistic benefits from the merger

Using this formula

Minimum estimated value of the synergistic benefits =Cash-Independent operation

Let plug in the formula

Minimum estimated value of the synergistic benefits = $578,000,000 – 533,000,000

Minimum estimated value of the synergistic benefits =$45,000,000

Therefore the minimum estimated value of the synergistic benefits from the merger is $45,000,000