The Primary Purpose of a Flip-In Provision Is To

question 85

Multiple Choice

The primary purpose of a flip-in provision is to:

• A) increase the number of shares outstanding while also increasing the value per share.
• B) dilute a corporate raider's ownership position.
• C) reduce the market value of each share of stock.
• D) give the existing corporate directors the sole right to remove a poison pill.
• E) provide additional compensation to any senior manager who loses his or her job as a result of a corporate takeover.

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Definitions:

Implicit Costs

Costs that represent the loss of potential income from resources when they are not utilized in their best alternative use.

Opportunity Cost

Forgoing possible gains from various alternatives by picking a specific one.

Personal Savings

The portion of an individual's income that is not spent on consumption and is saved for future expenses, investments, or emergencies.

Explicit Cost

Direct, out-of-pocket payments for the purchase of inputs or resources for business operations.