Fully Diluted Shares Outstanding, That Is, the Number of Target's

question 25

True/False

Fully diluted shares outstanding, that is, the number of Target's "basic" shares outstanding (i.e., pre- transaction shares outstanding) plus the number of shares represented by the firm's "in the money" options, warrants, and convertible debt and preferred securities should be used in the calculation of the total cost of a takeover.

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Definitions:

Bankruptcy Claims

Financial demands made by creditors against a debtor who has declared bankruptcy.

Debt/Equity Ratio

The financial ratio that illustrates the use of shareholders' equity versus debt in funding company assets.

M&M Proposition II

A firm’s cost of equity capital is a positive linear function of its capital structure.

Cost of Capital

The cost of funds used for financing a business, typically considered as the weighted average of the costs of equity and debt financing.