If a Firm Can Be Thought of as a Tub

question 17

Multiple Choice

If a firm can be thought of as a tub of whole milk that a farmer can separate into cream and skim milk, the skim milk would represent the

• A)firm as if it were all equity financed.
• B)ex-post firm value.
• C)levered equity of the firm.
• D)debt of the firm.

---

Definitions:

Minority Shareholders

Shareholders who own less than 50% of a company's shares and, therefore, do not have a controlling interest in company decisions.

Exclusionary Self-tender

A corporate strategy in which a company offers to purchase its own shares from shareholders, typically at a premium, as a means to reduce the number of outstanding shares and thus potentially increase the share price.

Repurchase Agreement

A financial transaction in which one party sells a security to another party with the promise to buy it back at a specified date and price.

Poison Pill

A strategy used by companies to deter hostile takeovers by making the company less attractive to the potential acquirer.