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Firm A has a value of $100 million, and B has a value of $70 million. Merging the two would allow a cost savings with a present value of $20 million. What is the PV of the merged company

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abiolataiwo2015

The PV of the merged company is :$10 million.

PV of the merged company

Using this formula

Present value of merged company =  (Value of A-Value of B) -Value of the merged entity

Present value of merged company=($100 million-$70 million)-$20 million

Present value of merged company=$10 million

Therefore the PV of the merged company is :$10 million.

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