ABC Corp.has offered 1 million shares having a total market value of $8 million for XYZ.After the merger is announced,shares in ABC trade for $7 each.If ABC is confident about XYZ's value,then the cost of the merger:

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Preannouncement:Cost of merger = ($8 × 1m) − Value of acquired firmPost announcement:Cost of merger = ($7 × 1m) − Value of acquired firmDifference = ($7 − 8) × 1m = −$1mSince the value of XYZ is assumed constant, the cost of the merger has decreased by $1 million.

ABC CorpHas Offered 1 Million Shares Having a Total Market Value