The Main Reason That Empirical Evidence of Shareholder Returns Fails

question 32

Multiple Choice

The main reason that empirical evidence of shareholder returns fails to provide conclusive evidence on the performance outcomes of mergers and acquisition is that:

• A)Stock market data only shows expectations about performance,not actual performance
• B)Stock market data is can only show the impact of M&A announcements and then only over a period of up to 12 months
• C)Both (a)and (b)
• D)Neither (a)nor (b)

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Definitions:

Income Tax Rate

The proportion of an entity's or person's income that is subject to taxation.

After-Tax Discount Rate

A rate used in financial analysis that takes into account the effect of taxes on the discount rate used for present value calculations.

Income Tax Rate

The fraction of salary that goes to the government in the form of taxes.

Straight-Line Depreciation

A method of calculating the depreciation of an asset, distributing its cost evenly across its useful life.