Which of the following statements seems most correct about a firm that has made a cash tender offer for 2 million shares of ABC Corp.at a price of $20,which is $6 higher than ABC's current value?
A) The economic gain of the merger exceeds $40 million.
B) The economic gain of the merger exceeds $28 million.
C) The economic gain of the merger exceeds $12 million.
D) The economic gain of the merger would be zero after accounting for merger cost.

Question

Quizplus · Accepted Answer

The economic gain of the merger is calculated as the difference between the offer price and the current value, multiplied by the number of shares. Here, ($20 - $14) * 2 million = $12 million.

Which of the Following Statements Seems Most Correct About a Firm