A Inc Is Contemplating a Business Combination with B Inc

question 12

Multiple Choice

A Inc. is contemplating a business combination with B Inc. However, A Inc.'s management is uncertain as to whether it should purchase B's assets or a majority of B's voting shares. The fair market values of B's assets far exceed their book values. A's management should be advised that IN MOST CASES:

• A) the purchase of B's shares would likely be the cheaper method of acquiring control; however, it would be less advantageous to the consolidated entity from tax standpoint.
• B) the purchase of B's shares would likely be the cheaper method of acquiring control. It would also be more advantageous to the consolidated entity from a tax standpoint.
• C) the purchase of B's shares would likely be the costlier method of acquiring control; however, it would be more advantageous to the consolidated entity from a tax standpoint.
• D) the purchase of B's shares would likely be the costlier method of acquiring control. It would also be less advantageous to the consolidated entity from a tax standpoint.

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Definitions:

Company's Values

The core principles and ethical standards that guide the behavior, decisions, and actions within a business organization.

Values Education

The educational process by which individuals develop moral and ethical values.

Instant Gratification

The urge to immediately satisfy cravings for enjoyment or satisfaction.

Work Commitments

Obligations or responsibilities associated with one's job or professional life.