8. Taxes and takeover bids Aa Aa In a merger, the acquiring firm can either pay in cash or make a stock offer. The acquirer can purchase the target firm's assets or buy shares directly from the target firm's shareholders. Consider the following statement about the impact of the takeover bid structure: The structure of the takeover bid affects the tax treatment of both the acquiring firm and the target firm's stockholders. Is this statement true or false? False True A takeover bid can be structured in different ways, making it either a taxable or a nontaxable offer. Based on your understanding of the impact of takeover bids on the target firm and the acquiring firm, review the diagram below and check which statements are correct in the right-hand column. Check all that apply Diagram: Merger Tax Effects Statements Goodwill is created for tax purposes. Transaction is not taxable. Payment is made mostly in stock Target shareholders receive shares of stock in the acquiring firm and pay no taxes at the time of the merger The acquiring firm continues to depreciate acquired assets at the old rate. The acquiring firm adds acquired assets to its books at their book values