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The Empirical Evidence Strongly Indicates That the Stockholders of the Target

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Essay

The empirical evidence strongly indicates that the stockholders of the target firm realize large wealth gains as a result of a takeover bid but the stockholders in the acquiring firm gain little, if anything. Although no definitive answer exists as to why this is the case, several possible explanations have been proposed. List and explain three of these possible explanations for the minimal returns to the acquiring firm's stockholders.


Definitions:

Total Cost

The sum of all costs incurred in the production of goods or services, including direct, indirect, fixed, and variable costs.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, allowing better budgeting accuracy.

Occupancy Expenses

Costs associated with occupying a space, including rent, utilities, and other maintenance fees.

Client-Visits

The act of meeting with clients or potential clients in person to discuss business, build relationships, or offer support.

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