Which of the following statements is most CORRECT?
A) Tax considerations often play a part in mergers.If one firm has excess cash,purchasing another firm exposes the purchasing firm to additional taxes.Thus,firms with excess cash rarely undertake mergers.
B) The smaller the synergistic benefits of a particular merger,the greater the scope for striking a bargain in negotiations,and the higher the probability that the merger will be completed.
C) Since mergers are frequently financed by debt rather than equity,a lower cost of debt or a greater debt capacity are rarely relevant considerations when considering a merger.
D) Managers who purchase other firms often assert that the new combined firm will enjoy benefits from diversification,including more stable earnings.However,since shareholders are free to diversify their own holdings,and at what's probably a lower cost,research of U.S.firms suggests that in most cases,diversification through mergers does not increase the firm's value.
E) Research of U.S.firms suggests that managers' personal motivations have had little,if any,impact on firms' decisions to merge.

Question

Quizplus · Accepted Answer

This statement is the most correct because it accurately reflects the reality that diversification through mergers is often not a value-increasing strategy. Additionally, it provides information on managers' assertions of diversification benefits and the research on the topic in U.S. firms. The other statements are not as accurate or informative.

Which of the Following Statements Is Most CORRECT