Which one of the following best defines synergy given the following? V_A = Value of firm A V_B = Value of firm B V_AB = Value of merged firm AB A)(V_A + V_B) - V_AB B)V_AB - (V_A + V_B) C)greater of 0 or (V_A + V_B) - V_AB D)greater of 0 or V_AB - (V_A + V_B) E)greater of 0 or V_AB

Question

Quizplus · Accepted Answer

Synergy can be defined as the increase in value resulting from the combination of two firms. It is calculated as the difference between the value of the merged firm and the sum of the values of the individual firms. Therefore, the correct formula is V_AB - (V_A + V_B), which is option D. Option E does not take into account the individual values of the firms and only considers the value of the merged firm. Options A and C have the wrong sign and would give a negative value for synergy.

Which One of the Following Best Defines Synergy Given the Following