A purely financial merger:
A) increases the risk that the merged firm will default on its debt obligations.
B) has no effect on the risk level of the firm's debt.
C) reduces the value of the option to go bankrupt.
D) has no effect on the equity value of a firm.
E) reduces the risk level of the firm thereby increasing the value of the firm's equity.

Question

Quizplus · Accepted Answer

The Answer of A purely financial merger:
A) increases the risk that the merged firm will default on its debt obligations.
B) has no effect on the risk level of the firm's debt.
C) reduces the value of the option to go bankrupt.
D) has no effect on the equity value of a firm.
E) reduces the risk level of the firm thereby increasing the value of the firm's equity.

A Purely Financial Merger