Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Question
Chapter 31, Problem 5PS
Summary Introduction
To indicate: Whether the transactions are true or false.
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Students have asked these similar questions
q10. The hubris motive for M&As refers to which of the following?
Explains why mergers may happen even if the current market value of the target firm reflects its true economic value
The ratio of the market value of the acquiring firm’s stock exceeds the replacement cost of its assets
Agency problems
Market power
The Q ratio
Which of the following statements is most CORRECT?
Oa. The primary rationale for most operating mergers is synergy.
Ob. In most mergers, the benefits of synergy and the premium the acquirer pays over the market price are summed and then
divided equally between the shareholders of the acquiring and target firms.
Oc. Financial theory says that the choice of how to pay for a merger is really irrelevant because, although it may affect the
firm's capital structure, it will not affect its overall required rate of return.
Od. The basic rationale for any financial merger is synergy and, thus, the estimation of pro forma cash flows is the single most
important part of the analysis.
Oe. The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the 2 firms will have
similar betas.
The cost of a merger may outweigh the potential gain if the:
present value of the acquired firm exceeds the price paid for it.
acquired firm's shareholders receive more than the value of their firm.
present value of the merged firms is greater than the sum of their individual values.
merger allows cost savings to occur.
Chapter 31 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 31 - Prob. 1PSCh. 31 - Prob. 2PSCh. 31 - Prob. 3PSCh. 31 - Taxation Which of the following transactions are...Ch. 31 - Prob. 5PSCh. 31 - Prob. 6PSCh. 31 - Prob. 9PSCh. 31 - Merger gains and costs Sometimes the stock price...Ch. 31 - Merger motives Suppose you obtain special...Ch. 31 - Prob. 12PS
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