A merger is expected to produce cost savings of $50 million and the acquired firm's shareholders will receive a premium of 20% over the $150 million value of their firm.The gain of the merger to the acquirer is:

Question

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The gain to the acquirer is the cost savings ($50 million) minus the premium paid to the acquired firm's shareholders (20% of $150 million, which is $30 million), resulting in a $20 million gain.

A Merger Is Expected to Produce Cost Savings of $50