Identify Which of the Following Statements Is True

question 51

Multiple Choice

Identify which of the following statements is true.

• A)Acquisition of the stock of a target corporation in a taxable acquisition transaction is reflected in an increased basis for the target corporation's assets on its books.
• B)Acquisition of 100% of the stock of a target corporation in a taxable transaction followed by a tax-free liquidation of the target corporation permits a step-up in the basis of the target corporation's assets to their FMV.
• C)Usually when 100% of the stock of a target corporation is purchased by an acquiring corporation, the basis of the assets of the target corporation reflects the purchase price of the target stock.
• D)All of the above are false.

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Definitions:

Discount Factor(s)

A multiplier for determining the present value of future cash flows or investments.

Pretax Return

The profit a company generates before taxes are taken into account, often expressed as a percentage of sales or investment.

Salvage Value

The forecasted selling price for an asset at the end of its operational life.

Discount Rate

The financial rate implicated in translating future cash flows into their present value during discounted cash flow analysis.