Which of the following statements are correct?
I.Liquidation value of a firm is equal to the present worth of expected future cash flows from operating activities.
II.When an acquiring firm purchases a target firm's equity,the acquirer must assume the target's liabilities.
III.The market value of a public company reflects the worth of the business to minority investors.
IV.The fair market value of a business is usually the lower of its liquidation value and its going-concern value.

Question

Quizplus · Accepted Answer

Statement II is correct because when acquiring a firm's equity, the acquirer typically assumes the target's liabilities. Statement III is correct because the market value of a public company reflects the value perceived by minority investors. Statement I is incorrect as liquidation value is based on asset sale value, not future cash flows. Statement IV is incorrect because fair market value is not necessarily the lower of liquidation and going-concern value.

Which of the Following Statements Are Correct