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Study Session 8: Corporate Finance: Financing and Control Issues

Flip-over poison pills

I’ve known that flip-over poison pills will allow the target’s shareholders to purchase deeply discounted shares of the acquirer. Some say that this will dilute the acquirer’s existing shareholder interest and hence helps deter the hostile takeover. I don’t see why this is so. Can anyone help me explain?

Thanks.

MMII with taxe: Equity vs debt financing

Hi guys, just a quick question..

If maximising debt increases the value of the firm as a result of the interest tax shields, then why is it that debt financing isnt always the way to go when maximising the share price of the firm? 

Growth Capital Expenditure

A company will initially outsource its electric scooter parts. But manufacturing these parts in-house beginning in 2016 will imply changes to an existing factory. This factory cost €7 million three years ago and had an estimated useful life of 10 years. Fromm is evaluating two scenarios:

Scenario 1: Sell the existing factory for €5 million. Build a new factory costing €30 million with a useful life of 10 years.

Scenario 2: Refit the existing factory for €27 million.

Corporate Finance - easy for bankers?

Started studying the part - and I feel like the whole Corporate Finance part in Level II is doable without much studying for say, Investment Bankers with DCF modeling and valuation experience/skills.

Anyone had the same feeling for this part?

Cash and Stock Merger Offer

If we are making an offer with a mix of cash and stock, do we first work with the cash component or the stock component?

R25 - Corporate Governance Q25

Hi guys, how’s everyone doing? Was wondering if there’s anything wrong with the answers provided? Cost of equity in the table clearly states 9.7% for 10/90 Debt/Equity. But in the answer it’s 9%. Am I missing something here?

Exhibit 1. Skylark Industries Estimated Costs of Capital for Various Capital Structures