The Positive Incremental Net Gain Associated with the Combination of Two

question 73

Multiple Choice

The positive incremental net gain associated with the combination of two firms through a merger or acquisition is called (the) ___________.

• A) Agency conflict.
• B) Goodwill.
• C) Merger cost.
• D) Consolidation effect.
• E) Synergy.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in capital budgeting and investment planning.

Original Investment

The initial amount of money used to purchase an asset or start an investment.

Cash Inflows

Money received by a business from its operations, financing, or investing activities.

Net Present Value

The divergence of cash inflows’ current worth from cash outflows’ present value during a defined duration.