Why Is It Not Sufficient to State That a Merger

question 54

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 firm may capture all of the gains.
• C) Merger costs should be negative after discounting.
• D) The merger's gain must also exceed its NPV.

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Definitions:

Reinforcement

In behavioral psychology, it refers to any stimulus that strengthens or increases the probability of a specific response or behavior.

Habituation

A decrease in behavioral response after lengthy or repeated exposure to a stimulus.

Conditioning

A process of behavior modification in which a response becomes more frequent or more predictable in a given environment due to reinforcement.

Sensitization

The process whereby a repeated administration of a stimulus results in the progressive amplification of a response.