Firm V was worth $500 and Firm A had a market value of $400. Firm V acquired Firm A for $450 because they thought the combination of the new Firm VA was worth $1,000. What is the synergy from the merger of Firm V and Firm A?

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Quizplus · Accepted Answer

The value of Firm V before the merger was $500 and after the merger, the value of the new firm VA is $1,000. Therefore, the increase in value can be attributed to the synergy generated by the merger. The increase in value is $1,000 - $500 - $400 = $100. Therefore, the synergy from the merger of Firm V and Firm A is $100.

Firm V Was Worth $500 and Firm a Had a Market