Which of the Following Is Generally a Way That LBOs

question 14

Multiple Choice

Which of the following is generally a way that LBOs can help a firm realize its potential value?

• A)The synergies created allow for cost savings
• B)The transaction reduces the disparity between a firm's actual and potential share price
• C)The acquisition reduces the likelihood of competition in the industry
• D)The transaction requires debt repayment with future free cash flow leaving management no discretion over the investment of these funds
• E)The buyout gives an opportunity to adjust the management structure and makeup

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Definitions:

Simple Interest

A method to calculate interest charges on a loan or investment based on the original amount (principal) and the interest rate, but the interest does not accumulate or compound.

Maturity Value

The total amount that will be received by an investor at the end of a bond's term or a deposit's duration, including both the principal and interest.

Term Deposit

A banking term for a fixed-term investment held at a financial institution where money is locked in for a certain period of time, earning a specified interest rate.

Simple Interest

Interest calculated only on the principal amount, or original sum borrowed or invested, without compounding.