Homework Answers
The total value created to a seller is the difference between the value he is willing to sell and the value at which he sold. BU1 is willing to sell at a value of $2 million, but he received a value of $5 million. Thus the value created to the seller is $3 million ($5-$2). The value created to a buyer is the value he is willingness to pay and the actual value he paid. BU2 is willing to pay $7.5 million. But he buys at a value of $5 million. Thus the value created to the buyer is $2.5 million ($7.5-$5). Thus the total value created by this transaction is $5.5 million $3 million +$2 million).
Answer: $5.5 million.
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