Which of the following should lead to a lower share price: (as the result of a mechanical effect, not due to signaling) 1. firm does a stock split 2. firm pays dividends 3. firm repurchases shares 4. firm issues shares 5. firm issues debt 6. firm makes an acquisition at a fair price, with negligible synergies O 1.2.3 0 2,3 O 1,2,3,4,5,6 O 2,3,5,6 O 1, 2, 3, 5 O 1,2 O 2,3,5

Which of the following should lead to a lower share price: (as the result of a mechanical effect, not due to signaling) 1. firm does a stock split 2. firm pays dividends 3. firm repurchases shares 4. firm issues shares 5. firm issues debt 6. firm makes an acquisition at a fair price, with negligible synergies O 1.2.3 0 2,3 O 1,2,3,4,5,6 O 2,3,5,6 O 1, 2, 3, 5 O 1,2 O 2,3,5

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Which of the following statements is most CORRECT? Oa. Managers who purchase other firms often assert that the new combined firm will enjoy benefits from diversification, including more stable earnings. However, since shareholders are free to diversify their own holdings, and at what's probably a lower cost, diversification benefits is generally not a valid motive for a publicly held firm. Ob. The smaller the synergistic benefits of a particular merger, the greater the scope for striking a bargain in negotiations, and the higher the probability that the merger will be completed. Oc. Since mergers are frequently financed by debt rather than equity, a lower cost of debt or a greater debt capacity are rarely relevant considerations when considering a merger. Od. Operating economies are never a motive for mergers. Oe. Tax considerations often play a part in mergers. If one firm has excess cash, purchasing another firm exposes the purchasing firm to additional taxes. Thus, firms with excess…
The most common methods for repurchasing shares is structural programs, such as accelerated share repurchase (ASR) programs Question options: a) True b) False
98) Which of the following is an example of an action done by a firm to conduct financial structuring? a) Stock buy-back b) Leveraged buy-out c) Either A and B d) Neither A nor b
Which of the following statements regarding merger deals is (are) correct? Choose all correct answer(s) On average, the price of the target increases substantially, while the price of the bidder does not increase by much. If the premium paid by the bidder exceeds the expected additional value to be created through the merger, the bidder's share price is likely to drop on the announcement of the bid. A bidder can often acquire a public-listed company for less than its current market value. Synergies are by far the most common justification that bidders give for the premium they pay for a target.
6. Why do firms accept underpricing of their initial public offerings (IPOs)?
[S1] By executing a rights offering, we acknowledge the preemptive right of current ordinary shareholders. [S2] When an initial public offering has been made, the underwriter would remit to the issuing entity cash equal to the total issue price less any issuance cost chargeable against the former. *a. Only S1 is true.b. Only S2 is true.c. Both are true.d. Both are false.

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