Which of the Following Statements About Mergers Is True

question 11

Multiple Choice

Which of the following statements about mergers is true?

• A)When deciding on a merger, the acquiring firm should use its own cost of capital to evaluate the value of the acquisition.
• B)A merger will add value only if synergies exist, which is why most mergers take place.
• C)Most mergers result in added value because the resultant firm is more diversified than the individual firms were before the merger.
• D)None of the above is a true statement.

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Definitions:

King William

A title referring to several European monarchs; most commonly recognizes King William III of England, who reigned from 1689-1702, notable for his role in the Glorious Revolution.

Mismanagement

Poor or ineffective management practices that result in a failure to achieve desired outcomes or handle resources responsibly.

Dominion of New England

A short-lived administrative union of English colonies in North America created by King James II in 1686.

Disbanding

The act of formally dissolving or breaking up a group, organization, or military unit, often resulting in its members dispersing or ceasing operations.