Answered: 21. Which of the following are…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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21. Which of the following are generally true about wealth gains or losses to stockholders following a merger? A. Stockholders of the target firm have zero or negative wealth gains B. Stockholders of the acquiring firm have zero or negative wealth gains C. Stockholders of competing firms have zero or negative wealth gains D. Stockholders of the target firm have positive wealth gains E. Both B and D 22. Empirical research about the method payment for mergers has shown that A. Returns for acquiring firm stockholders are much lower when cash is used for payment B. Returns for target firm stockholders are much lower when cash is used for payment C. Returns for competing firms are much lower when cash is used for payment D. Returns for acquiring firm stockholders are much higher when cash is used for payment E. None of the above 23. If a firm wishes to expand geographically, it is often preferable to do it by acquiring an existing firm rather than greenfield entry, because A. The acquiring firm must pay a control premium to the stockholders of the target firm B. Acquiring an existing firm implies construction delays in building a new factory C. Greenfield entry is slower than acquiring an existing firm D. Greater uncertainty exists over acquiring an existing firm than doing greenfield entry E. None of the above

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