Which Statement Best Describes Mergers

question 40

Multiple Choice

Which statement best describes mergers?

• A)The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the two firms will have similar betas.
• B)Financial theory says that the choice of how to pay for a merger is irrelevant because although it may affect the firm's capital structure, it will not affect its overall required rate of return.
• C)The basic rationale for any consolidation is financial synergy and, thus, the estimation of pro forma cash flows is the single most important part of the analysis.
• D)The primary rationale for most operating mergers is synergy.

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