Which of the Following Statements Is Most CORRECT

question 17

Multiple Choice

Which of the following statements is most CORRECT?

• A) Tax considerations often play a part in mergers. If one firm has excess cash, purchasing another firm exposes the purchasing firm to additional taxes. Thus, firms with excess cash rarely undertake mergers.
• B) The smaller the synergistic benefits of a particular merger, the greater the scope for striking a bargain in negotiations, and the higher the probability that the merger will be completed.
• C) Since mergers are frequently financed by debt rather than equity, a lower cost of debt or a greater debt capacity are rarely relevant considerations when considering a merger.
• D) Managers who purchase other firms often assert that the new combined firm will enjoy benefits from diversification, including more stable earnings. However, since shareholders are free to diversify their own holdings, and at what's probably a lower cost, diversification benefits is generally not a valid motive for a publicly held firm.
• E) All of the answers above are correct.

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Definitions:

Specific Phobia

A marked fear of a specific object or situation; a general label for any phobia other than agoraphobia and social phobia.

Phobic Disorder

An anxiety disorder characterized by an intense, irrational fear of specific objects, activities, or situations leading to avoidance behavior.

Somatoform Disorder

Mental disorders characterized by physical symptoms without a clear physical cause, where symptoms are thought to be the manifestation of psychological conflicts or distress.

Conversion Reaction

A psychological response where emotional distress is expressed through physical symptoms.