Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Question
Chapter 28, Problem 4P
Summary Introduction
To describe the reasons why shareholders of target companies enjoy an average gain when acquired, while acquiring shareholders often do not gain anything.
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Why do most acquisitions fail to create shareholder value?
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Chapter 28 Solutions
Corporate Finance
Ch. 28.1 - Prob. 1CCCh. 28.1 - Prob. 2CCCh. 28.2 - On average, what happens to the target share price...Ch. 28.2 - Prob. 2CCCh. 28.3 - What are the reasons most often cited for a...Ch. 28.3 - Prob. 2CCCh. 28.4 - Prob. 1CCCh. 28.4 - What do risk arbitrageurs do?Ch. 28.5 - Prob. 1CCCh. 28.5 - Prob. 2CC
Ch. 28.6 - Prob. 1CCCh. 28.6 - Prob. 2CCCh. 28 - What are the two primary mechanisms under which...Ch. 28 - Prob. 2PCh. 28 - What are some reasons why a horizontal merger...Ch. 28 - Prob. 4PCh. 28 - Prob. 5PCh. 28 - Prob. 6PCh. 28 - How do the carryforward and carryback provisions...Ch. 28 - Diversification is good for shareholders. So why...Ch. 28 - Your company has earnings per share of 4. It has 1...Ch. 28 - If companies in the same industry as TargetCo...Ch. 28 - Prob. 11PCh. 28 - Prob. 12PCh. 28 - Prob. 13PCh. 28 - Lets reconsider part (b) of Problem 99. The actual...Ch. 28 - ABC has 1 million shares outstanding, each of...Ch. 28 - Prob. 16PCh. 28 - How does a toehold help overcome the free rider...Ch. 28 - Prob. 18P
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- The corporate valuation model cannot be used unless a company pays dividends. a. True b. Falsearrow_forwardwhy would investors prefer to invest in a company with a regular divided policy than a company with a low regular and extra dividend policy?arrow_forwardCan a firm maximize its profit if it is only managed to meet shareholders' interests? (Own words please)arrow_forward
- To what extent do you feel the company’s dividend policies support or hinder their strategies? For example, if the company is attempting to grow, are they retaining and reinvesting their earnings rather than distributing them to investors through dividends? Be sure to substantiate your claims.arrow_forwardHow might capital rationing conflict with the goal of maximizing shareholders' wealth?arrow_forwardIn the extractive industries, businesses may pay dividendsin excess of net income. What is the maximumpermissible? How can this practice be justified?arrow_forward
- which of the following statements is false? O When a buyer values a target firm, the appropriate discount rate is the target's weighted-average cost of capital O Market value of a business measures the worth of that business to minority owners O Going-concern value of a firm is equal to the present value of expected net income O On average, acquisitions create value for shareholders of the target firmarrow_forwardHow does the percentage of ownership a company has in an investment effect them? Would the percentage of ownership be a big factor in your decision whether or not to invest in a company? Please explain.arrow_forwardWhich of the following theories is supported by the argument that shareholders can transform a company dividend policy into a different policy by means of investors buying and selling on their own account? a. dividend irrelevance theory b. "bird-in-the-hand" theory C. residual distribution model d. tax preference theoryarrow_forward
- Can a company be profitable but not liquid? Explain.arrow_forwardHelparrow_forwardYou observed that high-level managers make superior returns on investments in their company’s stock. Would this be a violation of weak-form market efficiency? Would it be a violation of strong-form market efficiency?arrow_forward
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