ABC Corp.has offered one million shares having a total market value of $8 million for XYZ Corp.After the merger is announced, shares in ABC trade for $7 each.If ABC is confident about XYZ's value, what has happened to the cost of the merger?

Question

Quizplus · Accepted Answer

The total market value of one million shares at the time of the offer was $8 million. If after the merger announcement, shares in ABC trade for $7 each, the total market value of one million shares reduces to $7 million. Therefore, the cost of the merger decreases by $1 million.

ABC CorpHas Offered One Million Shares Having a Total Market Value