Which of the Following Statements Is Most CORRECT

question 20

Multiple Choice

Which of the following statements is most CORRECT?

• A) 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.
• B) 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.
• C) 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.
• D) The primary rationale for most operating mergers is synergy.
• E) The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the 2 firms will have similar betas.

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Definitions:

Executive Team

A group of high-level managers or leaders within an organization responsible for making strategic decisions.

Stability

The state of being steady, consistent, and not prone to change, which is often sought after in various contexts for predictability and reliability.

Autonomy

The degree to which an individual has the freedom to make decisions and take actions independently.

Coordination

The act of organizing and aligning activities, tasks, and efforts among individuals or groups to achieve common goals efficiently.