When two firms merge, the value of the acquiring firm will change by the:
A)Ggain from the merger
B)NPV minus the cost of the merger
C)NPV of the merger
D)Cost of the merger

Question

Quizplus · Accepted Answer

The value of the acquiring firm will change by the NPV (Net Present Value) of the merger, which takes into account both the present value of the expected cash flows from the merger and the initial investment required for the merger (cost of the merger). Therefore, the NPV of the merger represents the overall financial impact of the merger on the acquiring firm. Factors that influence the NPV of the merger include synergies between the two firms, potential cost savings, growth opportunities, and risks associated with the merger.

When Two Firms Merge, the Value of the Acquiring Firm