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Prabhjot Sandhu
on Nov 07, 2024

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The value of a target firm to the acquiring firm is equal to:

A) The value of the target firm as a separate entity plus the incremental value derived from the acquisition.
B) The purchase cost of the target firm.
C) The value of the merged firm minus the value of the target firm as a separate entity.
D) The purchase cost plus the incremental value derived from the acquisition.
E) The incremental value derived from the acquisition.

Incremental Value

The additional or extra value generated by making a particular business decision or taking a specific action, compared to not doing so.

Purchase Cost

The total expense incurred to acquire an asset or service, including the price and additional charges.

Target Firm

A company that is the focus of a takeover or acquisition attempt by another company.

  • Clarify the principle of synergy when viewed through the lens of mergers and acquisitions.
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