Question

Which of the following statements is CORRECT?

a. The efficiency of the U.S. economy would probably be increased if hostile takeovers were absolutely forbidden.
b. Hostile takeovers are most likely to occur when a firm's stock is selling below its intrinsic value because of its poor management.
c. Stockholders, in general, would be better off if managers concealed good events and therefore caused the price of the firm's stock to sell at a price below its intrinsic value.
d. Hostile takeovers are most likely to occur when a firm's stock sells at a price above its intrinsic value because its management has been issuing overly optimistic statements about its likely future performance.

Answer 1

Answer:

b. Hostile takeovers are most likely to occur when a firm's stock is selling below its intrinsic value because of its poor management.

Explanation:

If the firm's stock is not performing to its potential i.e. it is undervalued as its selling price is below its intrinsic value, competitor might take advantage of it and may takeover to run it with better management