The Synergy of an Acquisition Between Firm a and Firm

question 38

Multiple Choice

The synergy of an acquisition between Firm A and Firm B can be determined by:

• A) subtracting the change in cost from the change in revenue.
• B) subtracting the change in taxes from the change in revenue.
• C) subtracting the change in capital requirements from the change in revenues.
• D) discounting the change in the cash flows of the combined firm by the risk adjusted discount rate.
• E) discounting the change in the revenues of the combined firm by the risk adjusted discount rate.

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Definitions:

Type II Error

The failure to reject a false null hypothesis or a false negative in hypothesis testing.

Significance Level

The significance level, denoted by alpha, is the threshold chosen by researchers below which a p-value must fall for results to be considered statistically significant.

Null Hypothesis

A statistical hypothesis that asserts there is no effect or no difference, and any observed deviation from this hypothesis is due to random variation.

Type II Error

A statistical error occurring when the null hypothesis is not rejected when it actually is false.