Multiple Choice
Does diversification achieved through a merger create value? Why or why not?
A) Yes;Diversification lowers the volatility of a firm's earnings which increases the firm's value to shareholders.
B) Yes;Diversification lowers the total risk of a firm which provides a compensable benefit.
C) Yes;Diversification increases a firm's earnings which creates value for the firm.
D) No;Diversification lowers unsystematic risk but has no real value to shareholders.
E) No;Diversification lowers a firm's earnings and thus destroys value.
Correct Answer:
Verified
Correct Answer:
Verified
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