Does Diversification Achieved Through a Merger Create Value? Why or Why

question 44

Multiple Choice

Does diversification achieved through a merger create value? Why or why not?

• A)Yes,diversification lowers the volatility of a firm's earnings which,increases the firm's value to shareholders.
• B)Yes,diversification lowers the total risk of a firm which,provides a compensable benefit.
• C)Yes,diversification increases a firm's earnings which,creates value for the firm.
• D)No,diversification lowers unsystematic risk but has no real value to shareholders.
• E)No,diversification lowers a firm's earnings and thus destroys value.

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Definitions:

Data Collection

The process of gathering and measuring information on variables of interest in a systematic way.

Acquisition Error

An error that arises during the process of data collection, often due to issues in capturing or recording data accurately.

Data Acquisition

The process of sampling signals that measure real-world physical conditions and converting the resulting samples into digital numeric values for processing by a computer.

Experimental Data

Data obtained through manipulation and controlled testing in an experiment, designed to discover causal relationships between variables.