The NPV of the merger, and whether the merger should be undertaken or not. Introduction: Merger: An agreement between two existing companies that combines them to form one single company is termed as a merger. This is done for the expansion of business, share in the market and value of shareholders. Synergistic benefits: Synergistic benefits arise out of the merger of two or more entities, which is a basic term meaning that the performance and value of the combined entity will be more than those of the individual entities. Net present value (NPV): It is the difference between the PV (present value) of cash inflows and that of cash outflows. It is used in capital budgeting and planning investments to assess the benefit and losses of any project or investment.

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Chapter 20, Problem 4P

Summary Introduction

To calculate: The NPV of the merger, and whether the merger should be undertaken or not.

Introduction:

Merger:

An agreement between two existing companies that combines them to form one single company is termed as a merger. This is done for the expansion of business, share in the market and value of shareholders.

Synergistic benefits:

Synergistic benefits arise out of the merger of two or more entities, which is a basic term meaning that the performance and value of the combined entity will be more than those of the individual entities.

Net present value (NPV):

It is the difference between the PV (present value) of cash inflows and that of cash outflows. It is used in capital budgeting and planning investments to assess the benefit and losses of any project or investment.

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