If the net present value of the target company is ________.
A) lesser than zero, the merger is acceptable
B) greater than zero, the merger is acceptable
C) greater than zero, the merger is rejected
D) equal to zero, the merger is acceptable

Question

Quizplus · Accepted Answer

A net present value greater than zero indicates that the cash flows generated by the merged entity will exceed the cost of the investment. Therefore, the merger is acceptable. A net present value lesser than zero would indicate that the merger is not financially viable. An NPV equal to zero would indicate that the investment will neither gain nor lose value, making it acceptable but not necessarily desirable.

If the Net Present Value of the Target Company Is