Asked by
Mohamed Alsaidi
on Nov 07, 2024
Verified
Which of the following statements is false?
A) Market values should be used to determine the value of a firm.
B) In calculating the value of a merger or acquisition only incremental cash flows should be considered.
C) The cost of capital for the target firm is generally considered to be the relevant discount rate associated with a merger or acquisition.
D) Transaction costs should be included when calculating the value of a merger.
E) There will typically be a gain in an acquisition if the target firm's management is better than the management of the acquiring firm.
Incremental Cash Flows
The additional cash flow a company receives from taking on a new project or investment, after accounting for expenses.
Market Values
The market price at which a service or asset can currently be sold or bought.
Transaction Costs
Expenses incurred during the buying or selling of goods and services, which can include broker fees, commissions, and taxes.
- Understand the concepts and definitions related to mergers, acquisitions, divestitures, and corporate governance.
- Identify the financial considerations and calculations involved in the valuation of mergers and acquisitions.
Verified Answer
PS
Learning Objectives
- Understand the concepts and definitions related to mergers, acquisitions, divestitures, and corporate governance.
- Identify the financial considerations and calculations involved in the valuation of mergers and acquisitions.