Which of the Following Statements Regarding Mergers and Taxes Is

question 55

Multiple Choice

Which of the following statements regarding mergers and taxes is false?

• A) Because it may be easier to measure performance accurately in a conglomerate, agency costs may be reduced and resources may be more efficiently allocated.
• B) Because these employees are obligated to hold idiosyncratic risk, they benefit when the firm reduces that risk by conglomerating.
• C) Like a large portfolio, large firms bear less idiosyncratic risk, so often mergers are justified on the basis that the combined firm is less risky.
• D) Because most stockholders will already be holding a well-diversified portfolio, they get no further benefit from the firm diversifying through acquisition.

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Definitions:

Preoperational Stage

A developmental phase, outlined by Jean Piaget, where children from about 2 to 7 years old engage in symbolic play and struggle with logic and taking the perspective of others.

Conservation

A cognitive ability recognized by Jean Piaget that allows a person to determine that a quantity will remain the same despite adjustment of the container, shape, or apparent size.

Object Permanence

The understanding that objects continue to exist even when they cannot be observed or heard.

Egocentric Thought

A mode of thinking, common in early childhood, where an individual perceives the world solely from their own perspective, often failing to recognize others' viewpoints.