Company A has 50 million outstanding shares at a price of $3. Company B has 30 million outstanding shares at a price of

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Company A has 50 million outstanding shares at a price of$3. Company B has 30 million outstanding
shares at a price of $2. A proposed merger between themseems likely to increase the standard deviation
of their equity returns from 30% individually to 50%combined. This merger is expected to generate an
operating synergy of $50 million. What would you expect themarket value of the combined company to
be after the merger? Assume the CAPM assumptions hold.Explain carefully