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.

Question

Quizplus · Accepted Answer

The statement E is false because the typical gain in an acquisition is often attributed to synergies between the acquiring and target firms, cost savings, or strategic advantages, rather than solely on the comparative quality of management teams.

Which of the Following Statements Is False