Firms a and B Intend to Merge and Firm a Has

question 88

Essay

Firms A and B intend to merge and Firm A has calculated the NPV of the merger to be $2 million after paying $8 million for Firm
B.If Firm A had a pre-merger value of $10 million and Firm B had a pre-merger value of $6 million, calculate the value of the merged entity, as well as the cost of the merger.
PV_AB = PV_A + PV_B + gain
= $10 million + $6 million + $4 million
= $20 million
Cost or merger = cash - PV_B
= $8 million - $6 million
= $2 million
NPV = $4 million - $2 million

---

Definitions:

Filters

Tools or processes used to remove unwanted elements from data, or to select specific information based on certain criteria.

Biases

Prejudices in favor of or against one thing, person, or group compared with another, usually in a way considered to be unfair.

Active Listening

A communication technique involving fully concentrating, understanding, responding and then remembering what is being said.

Speaker

The person who delivers an oral presentation or speech to an audience.