Cool Autos Acquired Automotive Industries in a Transaction That Produced

question 24

Multiple Choice

Cool Autos acquired Automotive Industries in a transaction that produced an NPV of $3.7 million. This NPV represents

• A) Synergy
• B) Book value
• C) Investment value
• D) Diversification
• E) None of the above

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Definitions:

Managerial Decision

The process by which managers choose among alternative strategies or actions to solve organizational problems or to take advantage of opportunities.

NPV

Net Present Value, a method used in capital budgeting to determine the profitability of an investment or project by calculating the present value of expected cash flows versus initial cost.

Independent Projects

Investment opportunities that do not affect the cash flows or profitability of other projects considered by an entity.

Managerial Decision

The process by which management responds to opportunities and threats by analyzing options and making determinations about specific organizational goals and courses of action.