Question 36 - 27854
Which of the following is NOT a possible consequence of takeover defenses? Takeover defenses:
A) | provide managers greater job security. |
B) | may start a bidding war for the firm’s shares. |
C) | change the firm’s legal status from public to private. |
D) | force the acquirer to negotiate directly with the firm’s Board of Directors. |
Question 37 - 27901
Which of the following statements regarding internal capital markets is FALSE?
A) | Political obstacles are likely to exist in efficiently allocating resources. |
B) | Management can channel free cash flow from mature business lines to high growth ventures. |
C) | The firm can credibly signal the quality of new ventures. |
D) | The firm can save money by not issuing securities in the capital markets. |
Question 38 - 9865
Overestimating the growth rate of a firm in using a valuation model would result in a value that is likely to be:
A) | too low. |
B) | can't tell from this information. |
C) | too high. |
D) | very accurate. |
Question 39 - 9849
The goal of asset valuation, based on the expected future cash flows of an asset, is to establish an asset’s:
A) | relative value. |
B) | future value. |
C) | intrinsic value. |
D) | market value. |
Question 40 - 9947
Roger Miller is the CEO of MetaCorp. MetaCorp is attempting to implement a strategic plan to establish a sustainable competitive advantage. The main thrust of the plan is to achieve a market share of at least 18 percent. Miller hires a strategy consultant to review the plan. The consultant concludes that MetaCorp’s strategic plan is inadequate. Which of the following is a likely reason for the consultant’s conclusion?
A) | An 18 percent market share is sufficient to create a sustainable competitive advantage. |
B) | An 18 percent market share is too large to create a sustainable competitive advantage. |
C) | Market share goals are not a competitive strategy. |
D) | The market share goal must be considered in relation to the number of competitors. |
Question
Your answer: B was incorrect. The correct answer was C) change the firm痴 legal status from public to private.
Takeover defenses may change the corporate charter but do not change the organizational and legal structure of the firm.
Question
Your answer: B was incorrect. The correct answer was C) The firm can credibly signal the quality of new ventures.
With internal capital markets, less information is provided to the financial markets concerning new ventures since no new external capital is being raised. If the firm has to access the financial markets, information on the venture will be disseminated.
Question
Your answer: B was incorrect. The correct answer was C) too high.
Using an estimate for a firm痴 growth rate that is too high would overstate the amount of future returns, resulting in a present value that is too high.
Question
Your answer: B was incorrect. The correct answer was C) intrinsic value.
Asset valuation based on the expected future cash flows is utilized to estimate an asset痴 intrinsic value, or the value derived from the asset's investment characteristics.
Question
Your answer: B was incorrect. The correct answer was C) Market share goals are not a competitive strategy.
A common mistake managers make when they ignore their generic strategy is that they focus on market share as a measure of competitive position, failing to recognize that market share is the result, and not the cause, of competitive advantage.
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