If Firm A acquires Firm B for cash, then the cost of the merger is equal to the cash payment minus Firm B's value as a separate entity.

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When Firm A acquires Firm B for cash, the cost of the merger is equal to the cash payment made by Firm A to acquire Firm B minus Firm B's value as a separate entity. This is because the value of Firm B as a separate entity would have been reflected in its market capitalization or book value. Therefore, if Firm A pays more than Firm B's value as a separate entity, it is considered a premium paid for the acquisition.

If Firm a Acquires Firm B for Cash, Then the Cost