In the Case of a Merger That Is Stock Financed

question 18

Multiple Choice

In the case of a merger that is stock financed, the assumed merger cost may be incorrect if the:

• A) value of the acquired firm's shares changes after the merger announcement.
• B) value of the acquiring firm's shares changes after the merger announcement.
• C) long-term interest rates increase.
• D)merger is either horizontal or vertical.

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Definitions:

Units-Of-Output Depreciation

A depreciation method that allocates an asset's cost based on its usage or production levels, rather than simply the passage of time.

Depreciable Cost

The total cost of a tangible asset that is subject to depreciation, excluding salvage value, to allocate over the asset's useful life.

Depreciation Rate

The percentage rate at which an asset is depreciated across its useful life, affecting the value of the asset on the balance sheet over time.

Straight-Line Method

A method of calculating depreciation by dividing the cost of an asset, minus its salvage value, by its useful life.