Firm Value and Overpayment on Acquisitions

Megatech Corporation, a large software firm with a market value for its equity of $ 100 million, announces that it will be acquiring FastMail Corporation, a smaller software firm, for $ 15 million. On the announcement, Megatech's stock price drops by 3%. Based upon these facts, estimate the amount the market thinks Megatech should have paid for FastMail Corporation.

How does NPV additivity enter into your answer?

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