When a firm makes an acquisition to exploit the unused debt capacity of the acquired firm it is seeking __________.
A) revenue enhancements
B) cost savings
C) tax gains
D) changes in capital requirements
E) economies of scale

Question

Quizplus · Accepted Answer

Acquiring a firm to utilize its unused debt capacity is primarily aimed at achieving tax gains. This is because the interest payments on debt are tax-deductible, which can reduce the overall tax burden of the combined entity.

When a Firm Makes an Acquisition to Exploit the Unused