Which of the Following Is the Best Definition of Greenmail

question 328

Multiple Choice

Which of the following is the best definition of greenmail?

• A) The complete absorption of one company by another, where the acquiring firm retains its identity and the acquired firm ceases to exist as a separate entity.
• B) Going-private transactions in which a large percentage of the money used to buy the stock is borrowed. Often, incumbent management is involved.
• C) Typically an agreement between firms to create a separate, co-owned entity established to pursue a joint goal.
• D) A targeted stock repurchase where payments are made to potential bidders to eliminate unfriendly takeover at-tempts.
• E) All publicly owned stock in a firm is replaced with complete equity ownership by a private group.

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Definitions:

Face Value

The original value or principal amount of a security as stated by the issuer.

Weighted Average Cost

A method of calculating the average cost of inventory or cost of goods sold by weighting each item by its relevance or quantity.

Cost of Equity

The yield a business seeks to determine whether an investment fulfills its requirements for capital returns, frequently calculated through methods such as the Capital Asset Pricing Model (CAPM).

Face Value

The nominal value of a security stated by the issuer.