The cost of a merger equals the:

Question

Quizplus · Accepted Answer

The cost of a merger is typically measured by the premium paid over the target's value as a separate entity, which represents the additional value expected to be generated by the combination of the two firms. The premium can be paid in cash, stock, or a combination of both, but what matters is the difference between the acquisition price and the fair value of the target's equity. Therefore, choices A and D are incorrect because they focus only on the amount of cash or stock paid, which may not reflect the true cost of the deal. Choice B is also incorrect because it assumes that the merger will generate positive synergies that offset the cost, which may or may not be the case. Therefore, the best choice is C.

The Cost of a Merger Equals The