When Evaluating an Acquisition You Should

question 78

Multiple Choice

When evaluating an acquisition you should:

• A)concentrate on book values and ignore market values.
• B)focus on the total cash flows of the merged firm.
• C)apply the rate of return that is relevant to the incremental cash flows.
• D)ignore any one-time acquisition fees or transaction costs.
• E)ignore any potential changes in management.

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Definitions:

Retroactive Interference

is a phenomenon where newly acquired information interferes with and hampers the recall of previously acquired information.

Proactive Interference

A type of memory interference that occurs when previously learned information interferes with the recall of new information.

False Memory

A psychological phenomenon where a person recalls something that did not happen or recalls it differently from the way it actually happened.

Persistence

The quality of continuing steadfastly or firmly in some action, purpose, or course of action, especially in spite of opposition.