Which of the following statements is FALSE?
A)Once the acquirer has completed the valuation process,it is in the position to make a tender offer- that is,a public announcement of its intention to purchase a large block of shares for a specified price.
B)If we view the pre-bid market capitalization as the stand-alone value of the target,then from the bidder's perspective,the takeover is a positive-NPV project only if the synergies created do not exceed the premium it pays.
C)Purchasing a corporation usually constitutes a very large capital investment decision,so it requires a more accurate estimate of value that includes careful analysis of both operational aspects of the firm and the ultimate cash flows the deal will generate.
D)A stock-swap merger is a positive-NPV investment for the acquiring shareholders if the share price of the merged firm (the acquirer's share price after the takeover)exceeds the premerger price of the acquiring firm.

Question

Quizplus · Accepted Answer

The statement in option B is false. The correct statement would be that the takeover is a positive-NPV project only if the synergies created exceed the premium it pays. This is because the premium paid is a cost to the acquiring firm, and for the acquisition to be profitable, the synergies created should outweigh this cost.

Which of the Following Statements Is FALSE