A Merger Which Is Expected to Produce Synergy

question 87

Multiple Choice

A merger which is expected to produce synergy

• A) Should be rejected because the synergy will dilute the combined firm's earnings per share
• B) Should be rejected because the first year's cash flow is negative
• C) Has a negative NPV
• D) Should be pursued because it creates value
• E) Reduces target firm revenues

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Definitions:

Cognitive Dissonance

A psychological conflict resulting from incongruous beliefs and attitudes held simultaneously.

Persuasion

The process of influencing someone's beliefs, attitudes, or behaviors through argument, reasoning, or appeal to emotion.

Rationalization

A defense mechanism where controversial behaviors or feelings are justified and explained in a seemingly rational or logical manner to avoid the true explanation.

Student Government

A student organization present in many high schools, colleges, and universities that provides a voice for students and manages various aspects of student life.