A potential merger that has synergy:
A) Should be rejected due to the projected negative cash flows.
B) Should be rejected because synergy destroys firm value.
C) Has a net present value of zero and thus returns the minimal required rate of return.
D) Creates value and therefore should be pursued.
E) Reduces the anticipated net income of the acquiring firm.

Question

Quizplus · Accepted Answer

Synergy in a merger implies that the combined entity is more valuable than the sum of the two separate entities due to efficiencies, cost savings, or increased revenue opportunities. This added value means the merger should be pursued.

A Potential Merger That Has Synergy