Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Question
Chapter 20, Problem 6DQ
Summary Introduction
To explain:Â The method of the accomplishment of an immediate appreciation in the earnings per share as a result of a merger through exchange trade variables as well as its drawbacks.
Introduction:
Earnings per share (EPS):
EPS measures the profitability of a company. It is the part of the profit of a company allocated to each outstanding share of the company.
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Students have asked these similar questions
q10. The hubris motive for M&As refers to which of the following?
Explains why mergers may happen even if the current market value of the target firm reflects its true economic value
The ratio of the market value of the acquiring firm’s stock exceeds the replacement cost of its assets
Agency problems
Market power
The Q ratio
A key issue facing financial executives of multinational firms is exposure to exchange rate changes.a. Define exposure, differentiating between accounting and economic exposure. What role does inflation play?b. Describe at least three circumstances under which economic exposure is likely to exist? c. Of what relevance are the international Fisher effect and purchasing power parity to your answers to parts a and b? d. What is exchange risk, as distinct from exposure
1. What makes analyzing the cash flow statement so important?
2. What conditions are necessary for arbitrage to work?
3. In your opinion, what are the possible reasons for a merger? And a demerger?
Please include referrence
Knowledge Booster
Similar questions
- 1. Explain the differences and similarities between Forward, Futures, andOptions. Then why can there be a Long Term Funding Deficit related to a company's cash flows? and Explain the meaning of international parity conditions, and why it can be used to predict exchange rates. and what is the meaning of foreign exchange exposure and types of foreign exchange exposure faced by multinational companies.arrow_forwardDiscuss the following barriers to international diversification. 1. Segmented markets2. Lack of liquidity3. Exchange rate controls4. Less developed capital markets5. Exchange rate risk6. Lack of informationarrow_forwardWhich of the following factors is not expected to generally have a favorable impact on the firm's cost of capital? Group of answer choices easy access to international capital markets. high degree of international diversification. high exposure to exchange rate fluctuations. all of thesearrow_forward
- Which of the following statements is the MOST accurate? A) International trade in assets can make both parties to the trade better off by allowing them to reduce the riskiness of return by portfolio diversification. B) International trade in assets can make both parties to the trade worse off by allowing them to increase the riskiness of return by portfolio diversification. C) International trade in assets can make both parties to the trade worse off by allowing them to eliminate all risk by portfolio unification. D) International trade in assets can make both parties to the trade better off by allowing them to eliminate all risk by portfolio unification. do not plagiarise please thnkuarrow_forwardWhich of the following statements is (are) FALSE? Select one or more alternatives: Studies suggest that forward exchange rates are unbiased predictors for future spot exchange rates in internationally integrated capital markets. If arbitrageurs have sufficient capital to trade on risk-free opportunities instantaneously, we will see persistent deviations from covered interest parity. If both uncovered interest parity hypothesis and covered interest parity hypothesis hold, we can predict what the spot exchange rate will be in one year from today based on today's one-year forward exchange rate. If forward exchange rates deviate from synthetic forward rates defined by covered interest rate parity, there will be risk-free arbitrage opportunities in efficient capital markets.arrow_forwardAn example of transaction exposure is when Question 4 options: companies have obligations for the purchase of goods at previously agreed prices. companies borrow funds in domestic currency. there is an impact of currency exchange rate changes on the reported financial statements of a company. there is a long-term effect of changes in exchange rates. changing exchange rates persists on future prices, sales, and costsarrow_forward
- What do you know about arbitrage opportunity? Discuss with examples. Also, present a scenario of any type of international arbitrage if possible. If so, how would it be executed and how would market forces be affected? Does arbitrage opportunity destabilize foreign exchange markets?arrow_forwardAssume a company needs to hedge payables. Which of the following conditions has to be met so a company would choose the options hedge? The break-even spot exchange rate is greater than the forward exchange rate. The break-even spot exchange rate is less than the forward exchange rate. The break-even spot exchange rate is less than the spot exchange rate. The break-even spot exchange rate is greater than the spot exchange rate.arrow_forwardTransaction exposure is the risk that a company's equities, assets, liabilities, or income will change in value as a result of exchange rate changes. Select one: True Falsearrow_forward
- why a firm should consider hedging net payables and recivables with currency options rather than forward contracts or future contractsarrow_forwardWhich of the following is a political risk to a company's bottom line? Spot exchange rates Changing tax rates Stable exchange rates Forward tax ratesarrow_forwardThe following are sensible motives for mergers EXCEPT: a. Economies of scope b. Reducing firm risk through diversification c. Reducing competition d. Eliminating inefficiencies e. All of the abovearrow_forward
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