Which of the Following Statements Regarding Recapitalization as a Takeover

question 13

Multiple Choice

Which of the following statements regarding recapitalization as a takeover defense is FALSE?

• A)Another defense against a takeover is a recapitalization,in which a company changes its capital structure to make itself less attractive as a target.
• B)Restructuring itself can produce efficiency gains,often removing the principal motivation for the takeover in the first place.
• C)By increasing leverage on its own,the target firm can reap the benefit of the interest tax shields.
• D)In many cases,a substantial portion of the synergy gains that an acquirer anticipates from a takeover are savings from a decrease in leverage as well as other cost reductions.

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Definitions:

Objective Tests

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Unconscious Determinants

Psychological factors that influence behaviors, feelings, and judgments without an individual's conscious awareness.

Foot-In-The-Door

A compliance tactic that involves getting a person to agree to a large request by first setting them up by agreeing to a modest request.

Indebtedness

The state of owing money or being under a moral obligation to repay a benefit or service received.