The Synergy of an Acquisition Between Firm a and Firm

question 36

Multiple Choice

The synergy of an acquisition between Firm A and Firm B can be determined by:

• A) subtracting the change in cost from the change in revenue.
• B) subtracting the change in taxes form the change in revenue.
• C) subtracting the change in capital requirements from the change in revenues.
• D) discounting the change in the cash flows of the combined firm by the risk adjusted discount rate.
• E) discounting the change in the revenues of the combined firm by the risk adjusted discount rate.

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Definitions:

LIFO

Last In, First Out, an inventory valuation method where the most recently produced items are recorded as sold first.

Falling Prices

A situation where the general level of prices for goods and services decreases over time.

LIFO Method

An inventory valuation method that assumes the last items added to inventory are the first ones to be sold (Last In, First Out).

Periodic Inventory System

An inventory valuation method where the ending inventory and cost of goods sold are determined at the end of the accounting period.