The Cost Of An Acquisition

We've discussed some of the benefits of acquisition. We now need to discuss the cost of a merger.7 We learned earlier that the net incremental gain from a merger is:

The NPV of the merger is therefore:

NPV = VB** - Cost to Firm A of the acquisition [25.1]

To illustrate, suppose we have the following premerger information for Firm A and Firm B:

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