Ato Corporation,a Member of a Japanese Horizontal Keiretsu,has Been Experiencing

question 32

Multiple Choice

Ato Corporation,a member of a Japanese horizontal keiretsu,has been experiencing poor sales and no profits for three years.What can it expect?

• A)Ato will survive because the Japanese market is relatively uncompetitive.
• B)The keiretsu bank will continue to support the ailing firm.
• C)Japan will allow Ato to cartel with competitors.
• D)A hostile takeover of Ato is likely.

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Definitions:

Cost of Equity

The hypothetical payment made by a business to its equity holders as a reward for the risk involved in investing their money.

Risk-Free Rate

The theoretical rate of return of an investment with no risk of financial loss.

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 indicates that the stock's price tends to be more volatile than the market.

Cost of Equity

The yield a company needs to determine whether an investment satisfies its capital return criteria.