1. Which of the following statements is FALSE?

A. When an acquirer buys a private target, it provides the target's owners with a way to reduce their risk exposure by cashing out their investment in the private target and reinvesting in a diversified portfolio.

B. It is possible to combine two companies with the result that the earnings per share of the merged company exceed the premerger earnings per share of either company, even when the merger itself creates no economic value.

C. To justify a takeover based on operating losses, management would have to argue that the tax savings are above what the firm would save using carryforward provisions. D. None of the options.

2. Which of the following statements regarding economies of scale and scope is FALSE?

	A.	Cost-reduction synergies are hard to predict and achieve.
	B.	There may also be costs associated with the size of large enterprises.
	C.	Synergies usually fall into two categories: cost reductions and revenue enhancements.
	D.	Because the CEOs of small firms receive information so quickly, small firms are often able to react in a timely way to changes in the economic environment.