Two Firms Merge and No Synergies Occur

question 12

Multiple Choice

Two firms merge and no synergies occur. Which of the following statements best describes the result?

• A) The reduction in risk in the combined firm benefits the bondholders at the expenses of the shareholders.
• B) The value of the debt in the combined firm will likely be greater than the value of the debt in the two separate firms.
• C) The size of the gain to the bondholders depends on the specific reductions in bankruptcy probabilities after the merger.
• D) All of the above.

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Definitions:

Infiltrated

The act of surreptitiously entering or becoming a part of an organization or place with a deceitful purpose.

Antecubital Area

The inner surface of the arm in front of the elbow, commonly used as a site for drawing blood or administering injections.

Fluid Homeostasis

The maintenance of a stable internal environment for fluids in the body, including the regulation of volume, pressure, and composition.

Antidiuretic Hormone

A hormone released by the pituitary gland that helps regulate the body's retention of water by increasing the reabsorption of water in the kidneys.