During the 1990s, Top Executives of Titanic, Inc

question 65

Multiple Choice

During the 1990s, top executives of Titanic, Inc., followed a pattern of aggressive acquisitions and diversification.Now, Titanic is performing poorly and earning below average returns.Lusitania, a large conglomerate firm, is in the final stages of purchasing Titanic.Lusitania has announced that it will fire Titanic's current top executives.The Titanic executives may not be worried about their impending job loss if they:

• A) plan to take poison pills.
• B) have golden parachutes.
• C) have silver handcuffs.
• D) have ironclad contracts.

Explain the concepts of cash flow estimation and its importance in the capital budgeting process.

Differentiate between independent and mutually exclusive projects and their impact on the project selection process.

Evaluate investment projects using discount and non-discount cash flow models effectively.

Comprehend the importance of the cost of capital in the project evaluation process.

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Definitions:

Subsidiary Company

A subsidiary company is one that is controlled by another company, typically referred to as the parent company, through ownership of more than half of the subsidiary’s voting stock.

Equity Method

This accounting technique is used for consolidating the financial statements of a company in which the investing company holds significant influence, but not full control or majority ownership.

Dividends Received

Income received by shareholders when a company distributes a portion of its profits to its stockholders.

Cash Dividends

Payments made by a company out of its profits to its shareholders, distributing cash among them.