Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Question
Chapter 28.3, Problem 2CC
Summary Introduction
To explain why “risk diversification benefits” and “earnings growth” are not good justifications for a takeover, intended to increase shareholder wealth.
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Can the goal of maximizing the value of the stock conflict with other goals, such as avoiding unethical or illegal behavior?
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Are managers of firms with formidable takeover defenses more or less
likely to act in the shareholders’ interest rather than their own?
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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- Why do most acquisitions fail to create shareholder value?arrow_forwardSuppose you need additional capital to expand,and you sell some stock to outside investors. If youmaintain enough stock to control the company,what type of agency conflict might occur?arrow_forwardExplain Limitations that have caused some companies to reduce their use of portfilio analysis. 1. Naively following the prescriptions of a portfolio model may actually reduce corporate profitsif they are used inappropriately.arrow_forward
- The net present value technique is an approach that goes against the goal of shareholder wealth maximization. True Falsearrow_forwardDiscuss the validity of risk diversification as a motivation for companies engaging in merger and acquisition activity?arrow_forwardWhat are the TWO primary advantages of using CAPM over DDM? It adjusts for risks It does not explicitly consider risk Applicable to companies that pay steady dividends Applicable to companies that pay no dividendsarrow_forward
- It is quite often we observe some firms takeover target firms from a different industry. If diversifying harms firm value and it is more efficient to make diversification at the investor (shareholder) level than at the firm level, why do you think the managements still choose to make diversified acquisitions?arrow_forwardIn theory, market risk should be the only “relevant” risk. However, companies focus asmuch on stand-alone risk as on market risk. What are the reasons for the focus on standalonerisk?arrow_forwardDescribe how underinvestment and asset substitution can destroy firm valueand how risk management can mitigate these problems.arrow_forward
- Why securitisation may be very beneficial for both institutions and investors ?arrow_forwardwhat happens if a company doesn't manage risk ?arrow_forwardmarket mispricing creates arbitrage opportunities, is this true and how. the actions of arbitrageurs contributes towards the removal of mispricing, is this true and how.arrow_forward
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