Which Two of These Are Required for an Acquisition to Be

question 25

Multiple Choice

Which two of these are required for an acquisition to be considered tax-free?
I.The bidder must purchase the target firm for less than its current market value.
II.The acquisition must have a business purpose other than the avoidance of taxes.
III.The stockholders in the target firm must retain an equity interest in the bidder.
IV.The acquisition must be a lump sum cash transaction.

• A)I and II only
• B)III and IV only
• C)II and III only
• D)I and III only
• E)II and IV only

---

Definitions:

Stocks' Returns

Stocks' returns refer to the gain or loss made on an investment in stock, usually expressed as a percentage of the investment's initial value.

Maximizing Returns

In finance, it refers to strategies aimed at increasing the gain or profit from investments or business operations to the highest possible level.

Expected Value

The mathematical average of all possible outcomes of a random variable, weighted by their respective probabilities.

Stocks

Shares of ownership in a company, which represent a claim on the company's earnings and assets.