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

question 24

Multiple Choice

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

• A)A spin-off 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.
• E)A spin-off results in a higher price for the subsidiary.

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