Which of the Following Is the Most Appropriate Reason for an Acquiring

question 110

Multiple Choice

Which of the following is the most appropriate reason for an acquiring firm's shareholders to prefer using stock financing for acquisitions?

• A) There is no cash outflow.
• B) It mitigates the effects of overvaluation of the target firm.
• C) It mitigates the effects of undervaluation of the target firm.
• D) It avoids dilution of shares.

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Definitions:

Proportional Tax

A tax system where the rate of taxation is the same for all taxpayers, regardless of income or wealth.

Payroll Tax

Duties levied on both employers and employees, usually reflecting a portion of the payroll expenses.

Per-hour Wage

The sum of money an employee receives for working one hour.

Payroll Tax

Fees assessed on employers and their employees, calculated frequently as a fraction of the salaries employees earn.