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:

Bounded rationality

A concept that human decision-making is limited by available information, cognitive limitations, and time constraints, leading to satisficing rather than optimal decisions.

Behavioral decision theory

A theoretical approach that studies the psychological factors influencing individuals' decision-making processes.

Potential investment

Refers to the opportunity to allocate resources, typically financial, into projects, assets, or ventures, with the expectation of generating a beneficial return over time.

Decision-making

The cognitive process of selecting a course of action from among multiple alternatives, often considered a core function of management.