A Merger Is Expected to Produce Cost Savings of $50

question 58

Multiple Choice

A merger is expected to produce cost savings of $50 million and the acquired firm's shareholders will receive a premium of 20% over the $150 million value of their firm.The gain of the merger to the acquirer is:

• A)$20 million
• B)$30 million
• C)$50 million
• D)$130 million Gain_A = gain from merger less premium given to shareholders of B
• = $50 million - $30 million