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.

---

Definitions:

Manifest Content

In psychoanalytic theory, the apparent, literal content of a dream, as opposed to the hidden or symbolic meaning (latent content).

Latent Content

In psychoanalytic theory, the underlying, hidden meaning of dreams as opposed to their manifest content, or the literal storyline of the dream.

Cognitive Barrier

An obstruction in thought process that prevents a person from achieving a desired outcome or solving a problem efficiently.

Hypnosis

A trance-like state of focused attention and increased suggestibility, often used therapeutically to modify behaviors or relieve pain.