Which of the Following Statements Is Most CORRECT

question 18

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) Operating economies are never a motive for mergers.

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Definitions:

Periderm

The outer protective layer of a plant's bark, produced as part of secondary growth, replacing the epidermis in mature plant stems and roots.

Xylem

The vascular tissue in plants responsible for the conduction of water and nutrients from the roots to the leaves.

Herbaceous Stems

Stems that are soft, green, and flexible, typically found in plants that do not produce wood and die back at the end of the growing season.

Epidermis

The outermost layer of cells covering an organism, particularly in plants where it forms a protective barrier against environmental damage.