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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Definitions:

Journal Entry

A record that represents the business transactions in the accounting books, involving at least one debit and one credit.

Stocks And Bonds

Financial instruments representing ownership in a company (stocks) or a debt agreement (bonds) from an issuer to the holder.

Journal Entry

A record in accounting that reflects a business transaction, listing the accounts and amounts to be debited and credited.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.