Which of the Following Statements Is Most CORRECTσ

question 6

Multiple Choice

Which of the following statements is most CORRECTσ

• A) the smaller the synergistic benefits of a particular merger, the greater the scope for striking a bargain in negotiations, and the higher the probability that the merger will be completed.
• B) since mergers are frequently financed by debt rather than equity, a lower cost of debt or a greater debt capacity are rarely relevant considerations when considering a merger.
• C) managers who purchase other firms often assert that the new combined firm will enjoy benefits from diversification, including more stable earnings. however, since shareholders are free to diversify their own holdings, and at what's probably a lower cost, diversification benefits is generally not a valid motive for a publicly held firm.
• D) operating economies are never a motive for mergers.
• E) tax considerations often play a part in mergers. if one firm has excess cash, purchasing another firm exposes the purchasing firm to additional taxes. thus, firms with excess cash rarely undertake mergers.

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Definitions:

Direct Labour Costs

Expenses related to employees who are directly involved in the production of goods or services.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to individual units of production, based on estimated costs.

Direct Materials

These are raw materials that are directly traceable to the manufacturing of a product.

Direct Labour-Hours

The sum of working hours for employees actively participating in the manufacturing procedure.