Discounted Cash Flow Methods Are Not Appropriate for Evaluating Mergers

question 37

True/False

Discounted cash flow methods are not appropriate for evaluating mergers because the cash flows are uncertain and the discount rate can only be determined after the merger is consummated.

---

Definitions:

Escrow Account

A financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction.

Purchase Price

The cost at which a product or service is bought, excluding additional expenses like shipping or taxes.

Family Business Perspective

A viewpoint that emphasizes the unique dynamics and challenges faced by businesses where ownership and management are controlled by members of the same family.

External

Factors or influences that exist or happen outside of the organization and can impact its operations or performance.