Which of the Following Is an Advantage of a Spin-Off

question 21

Multiple Choice

Which of the following is an advantage of a spin-off versus selling a subsidiary and distributing the cash?

• A)Increases the transaction costs associated with selling the subsidiary.
• B)Shareholders must immediately pay capital gains taxes versus ordinary income taxes on the value of the spin-off.
• C)A spin-off guarantees a lower cost of capital.
• D)The spin-off is not taxed as a cash distribution.

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Definitions:

Initial Cost

The upfront expenditure involved in acquiring an asset, starting a project, or pursuing an investment.

Canadian Dollars

The official currency of Canada, represented by the symbol CAD.

Long-Run Exposure Risks

Risks that a business faces over an extended period that can impact its financial stability, such as exchange rate fluctuations.

Foreign Exchange

The conversion or trading of one currency into another currency.