Which of the Following Statements Regarding Poison Pills Is FALSE

question 39

Multiple Choice

Which of the following statements regarding poison pills is FALSE?

• A)Companies with poison pills are harder to take over,and when they are taken over,the premium that existing shareholders receive for their stock is higher.
• B)Because a poison pill increases the cost of a takeover,all else equal,a target company must be in better shape to justify the expense of waging a takeover battle.
• C)Poison pills also increase the bargaining power of the target firm when negotiating with the acquirer because poison pills make it difficult to complete the takeover without the cooperation of the target board.
• D)By adopting a poison pill,a company effectively entrenches its management by making it much more difficult for shareholders to replace bad managers,thereby potentially destroying value.

Understand the balance required in managing multiple performance determinants simultaneously.

Appreciate the time frame and challenges involved in implementing and verifying the success of major changes.

Understand the components and calculations of intrinsic and time values of options.

Identify factors that influence the value of call and put options.

---

Definitions:

Baker's Wages

Baker's wages refer to the compensation paid to bakery workers or bakers for their labor and expertise in producing baked goods.

Prime Costs

The direct costs of manufacturing a product, which include direct materials and direct labor.

Conversion Costs

The costs incurred when converting raw materials into finished products, typically including direct labor and manufacturing overhead.

Production Labor Wages

The total amount of compensation paid to employees directly involved in the production of goods or services.