Acquirers may have different required rates of return because of differences in the ability to use financial leverage.

Question

Quizplus · Accepted Answer

Acquirers with higher ability to use financial leverage may require a lower required rate of return as they can use debt to finance their acquisitions and potentially increase their returns. On the other hand, acquirers with lower ability to use financial leverage may require a higher required rate of return to compensate for the higher risk of using equity capital to finance their acquisitions.

Acquirers May Have Different Required Rates of Return Because of Differences