Why Is It Not Sufficient to State That a Merger

question 107

Multiple Choice

Why is it not sufficient to state that a merger should occur simply because the economic gains are positive?

• A) Gains are typically of an accounting nature.
• B) Shareholders of the target may capture all gains.
• C) Merger cost should be negative after discounting.
• D) The merger's gain must also exceed its NPV.

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Definitions:

Taxable Income

The portion of an individual’s or corporation's income that is subject to taxes by the government.

Average Tax Rate

The ratio of the total taxes paid to the overall income, found by dividing the aggregate amount paid in taxes by the total income.

Income Tax Schedule

A chart or formula used to determine the tax rate applied to various levels of income.

Progressive

Describes a taxation system where the tax rate increases as the taxable amount increases, aiming to distribute the tax burden more equitably.