When Evaluating an Acquisition You Should

question 78

Multiple Choice

When evaluating an acquisition you should:

• A)concentrate on book values and ignore market values.
• B)focus on the total cash flows of the merged firm.
• C)apply the rate of return that is relevant to the incremental cash flows.
• D)ignore any one-time acquisition fees or transaction costs.
• E)ignore any potential changes in management.

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Definitions:

Clearing House Interbank

A financial institution providing settlement and clearing services for financial transactions between banks.

International Location

The strategic geographical placement of a business operation or segment outside its home country.

Syndicate

A group of individuals or organizations combined to promote some common interest.

Net Present Value

A financial metric indicating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.