Reasons a Parent Company May Pay More Than Book Value

question 16

Multiple Choice

Reasons a parent company may pay more than book value for the subsidiary company's stock include all of the following except

• A)the fair value of one of the subsidiary's assets may exceed its recorded value because of appreciation.
• B)the existence of unrecorded goodwill.
• C)liabilities may be overvalued.
• D)stockholders' equity may be undervalued.

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Definitions:

Attention

The act of concentrating on a particular stimulus while ignoring other stimuli, highlighting the brain's selective information processing.

Major Depressive Disorder

A mental disorder characterized by persistent feelings of sadness, lack of interest in activities, and possibly physical symptoms, affecting an individual's daily life.

Depressive Episode

A period characterized by symptoms of major depression, such as deep sadness, loss of interest, sleep disturbances, and feelings of worthlessness, lasting for at least two weeks.

Lethargy

A state of sluggishness, drowsiness, or lack of energy, which can be a symptom of various conditions.