Which of the Following Statements Regarding Mergers and Taxes Is

question 57

Multiple Choice

Which of the following statements regarding mergers and taxes is FALSE?

• A)Because it may be easier to measure performance accurately in a conglomerate,agency costs may be reduced and resources may be more efficiently allocated.
• B)Because some employees holding company stock are obligated to hold idiosyncratic risk,they benefit when the firm reduces that risk by conglomerating.
• C)Like a large portfolio,large firms bear less idiosyncratic risk,so often mergers are justified on the basis that the combined firm is less risky.
• D)Because most stockholders will already be holding a well-diversified portfolio,they get no further benefit from the firm diversifying through acquisition.

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Definitions:

Uniform Probate Code

A set of laws designed to standardize the process of administering a deceased person's estate across different jurisdictions.

Devise

Real property that is left in a will. In states that have adopted the Uniform Probate Code, the term refers to both real and personal property.

Defense of Marriage Act

A U.S. federal law enacted in 1996 that defined marriage as a union between one man and one woman for federal and inter-state recognition purposes, partially struck down in 2013.

Constitutionality

The quality or condition of being in accordance with a political constitution, especially pertaining to the legality of actions or statutes.