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14.          When evaluating an acquisition, you should do which of the following:                 a.     &nb

14.          When evaluating an acquisition, you should do which of the following:

                a.             Ignore market values of assets and focus on book value

                b.             Ignore the timing of when the cash flows will be received

                c.             Ignore acquisition fees and transaction costs

                d.             Apply the discount rate that is relevant to the incremental cash flows

                e.             Ignore potential losses of management talent

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Answer #1

When evaluating an acquisition, you should Apply the discount rate that is relevant to the incremental cash flows. We can not ignore the market values as they important. Also timings of the cash flows can not be ignored. Acquisition Fee and transaction fee also have hufe impact on the project evaluation.

Option D is correct.

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