Conglomerate Mergers May Be Explained by Which of the Following

question 94

Multiple Choice

Conglomerate mergers may be explained by which of the following?

• A) seeking financial synergies
• B) availability of free cash flow
• C) diversification/risk reduction
• D) all of the above

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Definitions:

Net Cash Flows

The difference between a company's cash inflows and outflows in a given period, indicative of its financial health.

Capital Budgeting

The process of evaluating and selecting long-term investments consistent with the firm's goal of wealth maximization.

Net Cash Flows

The difference between cash inflows and outflows during a specific period, reflecting the company's financial health.

Internal Rate of Return

A financial metric used to evaluate the profitability of potential investments, calculating the discount rate at which the net present value of costs and benefits of an investment equals zero.