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 NPV from the merger of Firm V and Firm A?

Question

Quizplus · Accepted Answer

The NPV from the merger is calculated as the difference between the value of the combined firm ($1,000) and the sum of the acquisition cost ($450) and the original value of Firm V ($500). Thus, NPV = $1,000 - ($500 + $450) = $50.

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