Ex. 3

Company A is considering acquiring company B.

Calculate the combined PV of Companies A and B, the goodwill and the net gain for the shareholders of company A and shareholders of Company B, considering the following financial information:

(EUR)

Present value of Company A

80

mn

Present value of Company B

40

mn

Cost saving from merger of A and B

15

mn

Price A pay for B

48

mn

The present value of company B increase by EUR 7 mn on the back of rumors about the potential merger.

Calculate the adjusted goodwill and adjusted gain for the shareholders of company A and shareholders of Company B after the rumors.