Which of the Following Is Most True About Synergy in the Context

question 93

Multiple Choice

Which of the following is most true about synergy in the context of M&A?

• A) Synergy refers to the cash flows that can be generated only as a result of two businesses combining
• B) Realizing synergy usually does not require investment
• C) Most often anticipated synergy is realized immediately following closing
• D) The value of synergy should not be reflected in the purchase price paid for a target firm
• E) None of the above

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Definitions:

Systematic Risk

The danger associated with the overall market or a specific sector of the market that cannot be mitigated by spreading investments.

Capital Asset Pricing Model

A model used to determine the theoretical rate of return of an asset, considering the asset’s risk relative to that of the market.

Beta

A measure used in finance to describe the relationship of an investment's returns with those of the market; it indicates the investment's risk compared to the market.

Rate of Return

The increase or decrease in the value of an investment throughout a certain timeframe, represented as a portion of the investment's initial cost.