Company A is considering acquiring Company B . The values of the two companies as separate entities

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Company A is considering acquiring Company B

.

The values of the two companies as separate entities are

20

million and

10

million respectively. Company A estimates that by merging the two companies, it will reduce its marketing and administrative costs by

500, 000

per year in perpetuity. Company A can offer shares of

50 %

of the value of the new company. The opportunity cost of capital is

10 % .

What is the cost of the merger to the stockholders of company A if the merger is done by exchanging costs?

Posted Date: May 18, 2024 07:06 PM

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Company A is considering acquiring Company B . The values of the two companies as separate entities

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