A B or C 1.) Say your company\'s stock becomes less volatile than in the past an
ID: 2782435 • Letter: A
Question
A B or C
1.) Say your company's stock becomes less volatile than in the past and, as a result, beta falls. Then assuming all the other important variables are held constant...
capital investment projects your company evaluates will have higher NPVs.
it will be more difficult to obtain a positive NPV for capital investment projects.
there will be no impact on capital investment project evaluation.
2.) If your firm wanted to avoid the formalities involved in a merger offer to another firm, or if you expected resistance by the target company's management to your merger offer, then you probably will...
ask the board of the target company to fire the current leadership team.
file for a merger exception with the SEC.
make a public tender offer for the shares of the target company.
3.) The proper way to determine an appropriate price for acquiring a firm is to...
project the additional cash flows resulting from the purchase, discount them back to PV using a cost of capital, and then add them up.
use the target company's current price/earnings ratio and multiply this by the company's current net income.
find the current market price of the target company's stock, multiply this by the number of shares outstanding to get market capitalization, or market value.
capital investment projects your company evaluates will have higher NPVs.
Explanation / Answer
Answer 1) A There will be no impact on capital investment project evaluation.
Answer 2) B) File for a Merger exception with the SEC.
Answer 3) A) Project the additional cash flows resulting from the purchase,discount them back to PV using a cost of capital, and then add them up.
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