Merging in Order to Lower Financing Costs Is Likely to Fail

question 51

Multiple Choice

Merging in order to lower financing costs is likely to fail for the following reason:

• A)Costs of issuing larger amounts of debt increase.
• B)Tax shields decrease for larger companies.
• C)Any gain from lowering the required interest rate is offset by increased guarantees on the debt.
• D)It is difficult for bondholders to calculate the postmerger debt outstanding.

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Definitions:

Emotional Dissonance

A discrepancy between the emotions a person displays and the emotions he or she actually feels.

Conceal Frustration

The act of hiding or suppressing feelings of annoyance or upset often to maintain social harmony or professionalism.

Emotional Regulation

Refers to the process by which individuals influence their emotions, how they experience them, and how they express them.

Positive Affect

A psychological term referring to the dimensions of mood that range from pleasantness to unpleasantness, indicating how positive one's emotional state is.