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How are the gains from mergers distributed between the shareholders of the acquired and acquiring firms?

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We observed that when the target firm is...

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CBA Corp.is worth $15 million as a stand-alone firm.ABC Corp.has offered 350,000 shares valued at $50 each to merge with CBA.After the merger, however, ABC's shares are worth only $45 per share.What was the cost of the merger?


A) ($1.75 million)
B) $0.75 million
C) $1.75 million
D) $3.25 million cost = $350,000 x $45 - $15 million
= $15.75 - $15 million

E) B) and D)
F) A) and D)

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