In a Merger or Acquisition, a Firm Should Be Acquired

question 34

Multiple Choice

In a merger or acquisition, a firm should be acquired if:

• A) it generates a positive net present value to the shareholders of an acquiring firm.
• B) it is a firm in the same line of business, in which the acquirer has expertise.
• C) it is a firm in a totally different line of business which will diversify the firm.
• D) it pays a large dividend which will provide cash pass through to the acquirer.

Recognize how asymmetric information can lead to market inefficiencies and how warranties, product reviews, and other mechanisms can mitigate such problems.

Comprehend the concepts of property rights and the role they play in market-based solutions to environmental issues.

Understand the significance and methods of measuring central tendency in distributions (mean, median, mode).

Grasp the concept of variability in distributions through the calculation and interpretation of range and standard deviation.

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Definitions:

Dividends

A company's profit-sharing with its investors, generally executed through financial payments.

Net Income

The net income of a company once all costs, taxes, and losses have been deducted.

Partial Equity Method

An accounting technique used when a company has significant influence over another company but does not control it outright, recognizing income to the extent dividends are received.

Net Income

The total earnings of a company after subtracting all expenses and taxes from total revenue.