1. [S1] When the earnings of a firm are for an indefinite period of time, the value of the firm using capitalization of earnings and using economic value added (EVA) will always be the same. [S2] The value of a firm using EVA is equal to the present value of earnings in excess of the cost of capital throughout all the years such earnings are projected. * Both are true. Both are false. Only S2 is true. Only S1 is true.
1. [S1] When the earnings of a firm are for an indefinite period of time, the value of the firm using capitalization of earnings and using economic value added (EVA) will always be the same. [S2] The value of a firm using EVA is equal to the present value of earnings in excess of the cost of capital throughout all the years such earnings are projected. *
Both are true.
Both are false.
Only S2 is true.
Only S1 is true.
2. Which is not a valid, acceptable reason for companies to merge?
Synergistic benefits arising from mergers.
Reduction in competition resulting from mergers.
Acquisition of assets at below replacement value.
Attempts to minimize taxes by acquiring a firm with large accumulated losses that can be used immediately.
Using surplus cash to acquire another firm and prevent unfavorable tax consequences for shareholders.
3. [S1] A forced liquidation will most probably yield to more undesirable results compared to an orderly liquidation. [S2] Liquidation value may be used as the terminal value for intrinsic valuation. *
Both are true.
Both are false.
Only S2 is true.
Only S1 is true.
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