NPV of a merger can be expressed as the value of the synergistic benefits, Δ V and less the merger premium. Merger: Merger is the combination of two entities into one in which shareholders of both the companies merge their resources into new company. Merger is basically the result of merge of two or more companies into one. Purchase Accounting Method for Mergers: In the purchase accounting method, the assets of the targeted company have to be recorded into the current market value in the books of acquiring company and goodwill assets account have to be created. Goodwill is the difference of current market value and purchase price. Synergy: Synergy is a state in which two or more companies are combined to perform better than the sum of their individual efforts in terms of productivity and revenue. Net Present Value (NPV): Net present value is a capital budgeting techniques which helps to find out the difference of the presents value of cash inflow and cash outflow of a future project.

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Chapter 29, Problem 11QP

Summary Introduction

To explain: NPV of a merger can be expressed as the value of the synergistic benefits, ΔV and less the merger premium.

Merger:

Merger is the combination of two entities into one in which shareholders of both the companies merge their resources into new company. Merger is basically the result of merge of two or more companies into one.

Purchase Accounting Method for Mergers:

In the purchase accounting method, the assets of the targeted company have to be recorded into the current market value in the books of acquiring company and goodwill assets account have to be created. Goodwill is the difference of current market value and purchase price.

Synergy:

Synergy is a state in which two or more companies are combined to perform better than the sum of their individual efforts in terms of productivity and revenue.

Net Present Value (NPV):

Net present value is a capital budgeting techniques which helps to find out the difference of the presents value of cash inflow and cash outflow of a future project.

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