Which of the Following Statements Is Most CORRECT

question 9

Multiple Choice

Which of the following statements is most CORRECT?

• A) The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the 2 firms will have similar betas.
• B) Financial theory says that the choice of how to pay for a merger is really irrelevant because, although it may affect the firm's capital structure, it will not affect its overall required rate of return.
• C) The basic rationale for any financial merger is synergy and, thus, the estimation of proforma cash flows is the single most important part of the analysis.
• D) In most mergers, the benefits of synergy and the premium the acquirer pays over the market price are summed and then divided equally between the shareholders of the acquiring and target firms.
• E) The primary rationale for most operating mergers is synergy.

---

Definitions:

Bases Of Power

The foundational sources of authority or influence one person or group holds over another, categorized into different types like coercive, reward, legitimate, expert, and referent power.

Manufacturing Company

A business entity focused on the production of goods using raw materials and machinery, often involving significant human labor and possibly automation.

Distance

The measurement of space between two points or the extent to which individuals are emotionally or culturally apart.

Authority's Social Power

The influence and control exerted by an individual or group in a position of authority, affecting the behavior or opinions of others within a social structure.