In a rights offering, the price of a share will drop by approximately the value of a right on the _____________ date.

Select one:

a. Ex-rights.

b. Standby.

c. Record.

d. Announcement.

e. Expiration.

Question 9

In the financial world, the term poison pill refers to:

Select one:

a. An unfriendly takeover that replaces the existing management.

b. The restructuring of a firm such that the stock is delisted and no longer available to the public.

c. A type of financial agreement that forces firms to buy back their securities at a stated price.

d. An unfriendly takeover offer that is so attractive it cannot be refused.

e. A tactic to make unfriendly takeover attempts unappealing.

Question 10

Lester's Meat Market is currently an all equity firm that has 24,000 shares of stock outstanding at a market price of $25 a share. The firm has decided to leverage its operations by issuing $200,000 of debt at an interest rate of 8%. This new debt will be used to repurchase shares of the outstanding stock. The restructuring is expected to increase the earnings per share. What is the minimum level of earnings before interest and taxes that the firm is expecting? Ignore taxes.

Select one:

a. $52,400

b. $57,620

c. $48,000

d. $60,200

e. $61,340