Firm A acquired Firm T by paying $5000 in cash for all of the latter's shares. The offer of $5000 was a 25% premium over Firm T's market cap the day before the acquisition was announced. Assume that Firm T was correctly valued the day before the acquisition announcement. 

What is the minimum incremental value the acquisition must create (in present value terms) so that it is not a value-destroying decision for the Firm A?

Answer rating: 100% (QA)

If Firm A paid a 25 premium over Firm Ts market cap then the market cap of Firm T before the acquisi... View the full answer