Control over a firm permits the possibility of changing the future cash flows. Which two of the following are possible results of achieving control on a target company?
A) A share may be less highly valued.
B) It could be valued on the basis of its discounted future cash flows.
C) It could be re- valued on the basis of previous cash flows.
D) A share may be more highly valued.

Question

Quizplus · Accepted Answer

Achieving control over a firm allows for the potential to influence and improve future cash flows, which can lead to a higher valuation based on discounted future cash flows (B) and potentially increase the share's value (D).

Control Over a Firm Permits the Possibility of Changing the Future