Which one of these statements is correct? A)Cash acquisitions provide greater benefits to acquiring shareholders than stock acquisitions when V_AB

Question

Which one of these statements is correct? A)Cash acquisitions provide greater benefits to acquiring shareholders than stock acquisitions when V_AB < V_A + V_B. B)Cash acquisitions with positive NPVs are more expensive than comparable stock acquisitions to the acquiring shareholders. C)Acquiring firms dilute ownership when an acquisition is an all-cash transaction. D)The cost of a cash acquisition is dependent upon the acquisition gains. E)The acquiring firm's shareholders are better served if a negative NPV acquisition is a stock,rather than a cash,transaction.

Quizplus · Accepted Answer

If an acquisition has a negative NPV, using stock rather than cash can be better for the acquiring firm's shareholders because it shares the loss with the target firm's shareholders, potentially reducing the impact on the acquiring firm's value.

Which One of These Statements Is Correct