A Common Procedure to Determine the Value of a Merger

question 8

Multiple Choice

A common procedure to determine the value of a merger candidate is to estimate the present value of discounted cash flows and the expected after-tax earnings attributable to the merger.This can be done on all of the following levels except:

• A)Optimistic.
• B)Pessimistic.
• C)Probable scenarios.
• D)Logical scenarios.

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Definitions:

Cash Account

An account that records all transactions involving cash inflows and outflows.

Bank Statement

A document provided by a bank, summarizing the transactions that occurred in an account over a period.

Accrual Accounting

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash transaction occurs.

Interest Expense

This is the cost incurred by an entity for borrowed funds, reflected as a line-item expense in the income statement.