Which one of these statements is true?
A)The NPV of a merger can only be shared with the target firm's shareholders if the merger is financed with cash.
B)A cash acquisition affects the control of a bidder firm.
C)An acquisition financed with shares of stock is generally a tax-free transaction for all involved shareholders.
D)A cash acquisition causes the shareholders of the target firm to share in any merger losses.
E)A cash acquisition is less expensive than a stock acquisition to the shareholders of the acquiring firm when a merger produces a negative NPV.

Question

Quizplus · Accepted Answer

An acquisition financed with shares of stock is generally a tax-free transaction for all involved shareholders because it is considered an exchange of shares rather than a taxable sale of assets or securities. This allows shareholders to defer any capital gains taxes until they actually sell the new shares they receive.

Which One of These Statements Is True