In a Merger or Acquisition,an Asset Should Be Acquired If

question 15

Multiple Choice

In a merger or acquisition,an asset should be acquired if it:

• A) generates a positive net present value to the shareholders of an acquiring firm.
• B) is a firm in the same line of business in which the acquirer has expertise.
• C) is a firm in a totally different line of business which will diversify the firm.
• D) pays a large dividend which will provide a cash pass through to the acquirer.
• E) None of these.

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Definitions:

Underwriting Syndicate

A group of financial institutions that work together to issue new securities to the public, sharing the risk associated with the underwriting process.

Investment Banks

Financial institutions that provide a variety of services, including underwriting, acting as intermediaries in mergers and acquisitions, and facilitating securities trading.

Initial Margin

The minimum amount of equity required to enter into a leveraged position or futures contract to cover potential losses.

Margin Loan

A loan given by a broker to an investor to purchase securities, where the securities act as collateral for the loan.