Asked by Emalie Saalsaa on Jun 01, 2024
Verified
The incremental gain from a merger is defined as the:
A) Stand-alone value of the target firm minus the synergistic effects.
B) Value of the combined firm minus the sum of the stand-alone values of each firm.
C) Stand-alone value of the acquired firm minus the acquisition costs.
D) The sum of the stand-alone values of both firms minus the acquisition costs.
E) The value of the purchasing firm plus the synergistic effects minus the acquisition costs.
Incremental Gain
The additional benefit or profit received from making a change or taking a new action.
Synergistic Effects
The enhanced outcome or benefit that results when two or more entities (such as companies or products) combine their efforts or resources.
- Analyze the financial implications of mergers.
Verified Answer
ZK
Zybrea KnightJun 06, 2024
Final Answer :
B
Explanation :
The incremental gain from a merger is the additional value created by combining two firms, which is calculated as the value of the combined firm minus the sum of the stand-alone values of each firm. This reflects the synergies or additional value created by the merger that did not exist when the firms were separate.
Learning Objectives
- Analyze the financial implications of mergers.