Firm V was worth £450 and Firm A had a market value of £375.Firm V acquired Firm A for £425 because they thought the combination of the new Firm VA was worth £925.What is the NPV from
The merger of Firm V and Firm A?

Question

Quizplus · Accepted Answer

The NPV of the merger can be calculated by subtracting the acquisition cost from the present value of the future cash flows generated by the newly formed firm. 
NPV = (VA - 425) - (V + A)
Given that VA = 925, V = 450, and A = 375, 
NPV = (925 - 425) - (450 + 375) = 50 
Therefore, the best choice is B, with an NPV of £50.

Firm V Was Worth £450 and Firm a Had a Market