Which of the Following Statements Is Most CORRECT

question 25

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,research of U.S.firms suggests that in most cases,diversification through mergers does not increase the firm's value.
• E) Research of U.S.firms suggests that managers' personal motivations have had little,if any,impact on firms' decisions to merge.

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Definitions:

Historical Circumstances

The situational contexts and conditions that existed in the past and influenced events, decisions, or outcomes.

Present Expectations

The anticipations or outlooks individuals have regarding their current situations or conditions.

Psychodynamic Perspective

An approach in psychology that emphasizes the role of unconscious processes and childhood experiences in shaping personality and behavior.

Traditional Psychoanalysis

A form of therapy originally developed by Sigmund Freud that emphasizes unconscious processes and past experiences in explaining current behavior.