Why Would a Corporation Purchase the Stock of Another Corporation

question 137

Multiple Choice

Why would a corporation purchase the stock of another corporation?

• A)To prevent double taxation of its shareholders
• B)Because dividends received by a corporation are partially tax exempt
• C)It is equivalent to a tax carried forward
• D)It is equivalent to a tax carried back

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Definitions:

Present Value

Present value represents the contemporary worth of a future sum or cash flow sequence, discounted by a certain return rate.

Payback Method

A capital budgeting technique that calculates the amount of time required to recoup the original investment.

Cash Flows

The total incoming and outgoing monetary flow in a commerce, influencing its immediate financial capabilities.

Annuity Stream

A series of fixed payments made at equal intervals over a specified period of time.