PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Question
Chapter 31, Problem 7PS
a)
Summary Introduction
To discuss: The cost of debt of a company is darn high and the banks did not reduce the interstate as long as the company stuck in the kind of volatile widget trading business. The company needs to acquire other companies with the safer income streams.
b)
Summary Introduction
To discuss: The given comment
c)
Summary Introduction
To discuss: The given comment
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Students have asked these similar questions
You read a story in the newspaper announcing the proposed merger of Dell Computer and Gateway. The merger is expected to greatly increase Gateway’s profitability. If you decide to invest in Gateway stock, you can expect to earn
(a) above-average returns since you will share in the higher profits.
(b) above-average returns since your stock price will definitely appreciate as higher
profits are earned.
(c) below average returns since computer makers have low-profit rates.
(d) a normal return since stock prices adjusts to reflect expected changes in profitability almost immediately.
Which of the following statements are incorrect regarding how much debt a company should borrow? Choose all that apply.
Question 9 options:
A
As long as the company can generate higher returns on its new projects than its borrowing interest rate, borrowing more debt will enhance the company's ROE.
B
Borrowing more debt will increase a company's distress level.
C
The bigger the company, the more it should borrow
D
Debt is considered a more expensive capital source.
6. IPO price stabilization
Which of the following strategies can underwriters use to prevent institutional investors from flipping? Check all that apply.
They can require an overallotment clause in the underwriting agreement of the IPO.
They can agree to make more shares of future IPOS available to investors that hold on to the initial shares for a relatively long period of
time.
They can require a lockup clause in the underwriting agreement of the IPO.
They can agree to sell the shares in the IPO at a lower price than suggested by their bookbuilding analysis.
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