Firm A has a market value of $318,000 while Firm B's market value is $69,000. Firm A just acquired Firm B for $75,000 cash. What is the net present value of the acquisition if the merger creates $15,500 of synergy?
Multiple Choice
A. $7,000
B. −$6,000
C. $4,500
D. −$13,000
$9,500
When a target company is acquired by a buyer, Net present value of the acquisition is calculated using
NPV = Synergy + Value of target company - cost paid
So here, NPV = 15500 + 69000 - 75000 = $9500
net present value of the acquisition is $9500
Firm A has a market value of $318,000 while Firm B's market value is $69,000. Firm...