Which One of the Following Statements Is Correct

question 291

Multiple Choice

Which one of the following statements is correct?

• A) Acquiring firms tend to avoid firms with large net operating losses when they are seeking a target firm to acquire.
• B) If an acquisition increases the debt level of a firm the tax liability of the firm tends to increase as a result.
• C) If either an increase or a decrease in the level of production causes the average cost per unit to increase the firm is currently operating at its optimal size.
• D) Firms can always benefit from economies of scale if they increase the size of their firm through acquisitions.
• E) If a firm uses its surplus cash to acquire another firm the shareholders of the acquiring firm immediately incur a tax liability related to the transaction.