Which of the Following Statements Is Most CORRECT

question 15

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 two firms will have similar betas.
• B) The goal of merger valuation is to value the target firm's total capital at the target firm's weighted average cost of capital because a firm is acquired from all of its investors--both shareholders and creditors.
• C) The basic rationale for any financial merger is synergy and,thus,the estimation of pro forma 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.

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