A potential merger that has synergy:
A) Should be rejected due to the projected negative cash ﬂows.
B) Should be rejected because synergy destroys ﬁrm value.
C) Has a net present value of zero and thus returns the minimal required rate of return.
D) Creates value and therefore should be pursued.
E) Reduces the anticipated net income of the acquiring ﬁrm.

Question

Quizplus · Accepted Answer

A potential merger that has synergy creates value and therefore should be pursued. Synergy means the combination of the two companies will have greater financial benefits than either of the companies would have separately. It's a significant indicator that the merger has the potential for growing earnings, reducing expenses, and increasing shareholder value.

A Potential Merger That Has Synergy