Firms A and B, both of which are 100% equity, are going to merge. Before the merger, Firm A (100 shares outstanding) is worth $15,000. Firm B (50 shares outstanding) is worth $10,000. The combined firm is worth $30,000. Firm A will pay $11,500 in cash for Firm B. What is the NPV of the merger to Firm A?

Question

Quizplus · Accepted Answer

The Answer of Firms A and B, both of which are 100% equity, are going to merge. Before the merger, Firm A (100 shares outstanding) is worth $15,000. Firm B (50 shares outstanding) is worth $10,000. The combined firm is worth $30,000. Firm A will pay $11,500 in cash for Firm B. What is the NPV of the merger to Firm A?

Firms a and B, Both of Which Are 100% Equity