Borrowing to pay a premium in an acquisition may be theoretically justified if value is increased with leverage.

Name: Borrowing to pay a premium in an acquisition may be theoretically justified if value is increased with leverage.
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Question

Quizplus · Accepted Answer

If the value of the company being acquired increases with leverage, it may justify borrowing to pay the premium in the acquisition. However, it is important to consider the risks and potential costs of leverage, such as interest expense and financial distress.

Borrowing to Pay a Premium in an Acquisition May Be