The Profit to Be Gained from Buying a Parent Firm

question 87

Multiple Choice

The profit to be gained from buying a parent firm and selling off its portfolio piecemeal gives potential buyers a significant ________.

• A) pre-sale profit
• B) consolidation discount
• C) diversification discount
• D) competitive advantage

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Definitions:

Refunding Investment Outlay

The process of reallocating or investing capital in new assets or projects with the intention of generating returns or benefits that exceed the initial costs.

Marginal Tax Rate

The marginal tax rate is the rate of tax that applies to the next dollar of taxable income above a pre-determined level.

Call Premium

The additional amount a bond issuer must pay over the bond's face value if it is called before its maturity date.

Closely Held

Refers to a company whose shares are owned by a relatively small number of shareholders, often with the shares not being traded publicly.