Why Might Shareholders of an Acquiring Firm Prefer to Finance

question 21

Multiple Choice

Why might shareholders of an acquiring firm prefer to finance mergers with stock rather than with cash?

• A) Stock financing is always less costly due to tax consequences.
• B) EPS fall when mergers are financed with cash.
• C) Target-firm shareholders will bear part of the cost if merger benefits were overestimated.
• D) All merger gains go to the acquirer when financed with stock.

---

Definitions:

Moving Away

Trying to find peace by avoiding others and escaping conflict.

Basic Fault

A lack of connection between the child and mother that can later impact adult relationships.

Split Object Image

A concept in psychology referring to the mental representation a person has of another being, divided between positive and negative perceptions.

Transference

The process by which emotions and desires originally associated with one person are unconsciously redirected towards another.