Which of the Following Questions Is False

question 9

Multiple Choice

Which of the following questions is false?

• A) The method of payment (cash or stock) affects how the value of the target's assets is recorded for tax purposes and it affects the combined firm's financial statements for financial reporting.
• B) The combined firm must mark up the value assigned to the target's assets on the financial statements by allocating the purchase price to target assets according to their fair market value.
• C) Any goodwill created in a merger deal can be amortized for tax purposes over 15 years.
• D) Many transactions are carried out as acquisitive reorganizations under the tax code. These structures allow the target shareholders to defer their tax liability on the part of the payment made in acquirer stock but they do not allow the acquirer to step up the book value of the target assets.

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Definitions:

Gold

A precious metal that is used as an investment, a store of value, and in jewelry, due to its scarcity, durability, and aesthetic appeal.

Credit Default Swap

A financial derivative allowing an investor to "swap" or offset their credit risk with that of another party.

Financial Risk

Financial risk encompasses the possible loss of financial assets, liabilities, or financial failure due to variables like currency fluctuations, interest rate changes, and funding challenges.

Capital Structure

The mix of debt and equity maintained by a firm.