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 ability of the target firm's shareholders to benefit from future merger$-$related gains.

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 choose which statements are correct.

Diagram: Merger Tax Effects

A Check all that apply.

The acquiring firm does not create goodwill for tax purposes.

The acquiring firm adds acquired assets to its books at their appraised values.

The target firm incurs immediate tax liability for the amount of gain $($difference between purchase price and book value$).$

The target firm distributes a liquidating dividend to its shareholders of money left over after paying taxes.