| Nowadays the international economic activities are extremely characterized by economic globalization and integration. At the same time, transnational M & A activities dominated by transnational corporation aggravate the structural adjustment and competition of world economy and quickly transform the international intrinsic division of production. The economy is bound to melt into the international economic society with more opened steps when China has successfully joined WTO, though facing up with a new reform that mainly contains structural adjustment and systematical innovation. The transformation of reform that focuses on Fixed-quantity Adjustment, will be sure to show the tremendous charm of optimum resources allocation of M & A and it is the fixed fact that M & A will stride forward to a more international, marketable, essential and scientific field. Although M & A in our country has gained comparatively full development, the phenomenon of target firm being priced vaguely and lacking scientific basis is not minority in the practice of M & A .The analysis of implied returns and costs is always easy to be neglected by the acquisition enterprises, which limits the efficient appliance of M & A to an extreme degree and thus affects the efficiency of the whole economic run. Undoubtedly, it is of great theoretical significance and practical value while carefully investigating the implied returns and costs in target firm and trying to modify the existing pricing model of target firm. Based on the preceding recognition, some important conclusions are drawn as follow:1. Alough a lot of researchers state their views on the motive of M & A in different angles, the author argues that the last and the ultimate motive in M & A derives from the internal power of purchasing the maximal profit and external pressure of fiercely competition and so the other motive should be the derivation and variation of it.2.Though analyzing the international and native practical characteristics in M & A, the author finds that M & A in the present shows increasingly international, marketable, essential and scientific trend. With the aggravation of market competition and deepness of reform, M & A will plays a more and more important role in optimum allocation of social resources and development strategy of enterprises.3.While the author introduces the existing pricing models, he also elaborates theadvantage and disadvantage of the models, and lays particular stress on the determination of capital costs in Rappaport model. Comparing various views, it is suggested that the discount rate should utilize three kinds of capital costs with weighted dealing when considering the capital costs of acquisition enterprise, target firm and merged enterprise synthetically.4.Linking with the reality of M & A, the author thinks that implied returns and costs which is easily ignored or not easy to be perceived exist in M & A, as a result, the analysis of returns and costs should not be overlooked in the definition of target firm's value. In this key part of thesis, the author discusses 11 kinds of implied returns and 7 kinds of implied costs in detail. By the preceding analysis, the author revises the pricing model, that is, the whole value of target firm is supposed to plus the net implied returns of target firm on the basis of Rappaport or Weston model .The mathematical formula is as follow:Value of target firm = basic value + net implied returns of target firm. When: net implied returns of target firm = implied returns - implied costs.5. As common commodity of M & A market, the author held the view that, the target firm will have a process of market price forming under the condition of the perfect market mechanism. Through analysis on the relation of demand and supply, the author describes the curve of demand and supply, and then probes the partial equilibrium of M & A market. Finally, the author analyzes the M & A market interestedly and demonstrates the super profit or loss, which the acquisition enterprise may bear under the condi...
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