If the shareholders of an acquired firm capture all of the merger's gain,then the:
A) cost of the merger is zero.
B) NPV of the merger is zero.
C) EPS will increase.
D) acquiring firm retains all merger benefits.

Question

Quizplus · Accepted Answer

The NPV of the merger represents the overall value created by the merger, and if all of the gain is captured by the shareholders of the acquired firm, then the acquiring firm does not benefit from the merger. Therefore, the NPV of the merger would be zero. The cost of the merger could still be significant, and the EPS of the acquiring firm would also likely be impacted, but those factors are not directly related to the capture of the merger's gains by the acquired firm's shareholders.

If the Shareholders of an Acquired Firm Capture All of the Merger's