Carver Industries, a news media company, is being bought out by its CEO Elliot Carver and...
Carver Industries, a news media company, is being bought out by its CEO Elliot Carver and MI-6, a buyout fund. The buyers are trying to decide whether to pay with cash or stock for the target. Which method will lead to greater value uncertainty for the shareholders of Carver Industries?
Homework Answers
Stock payments method will lead to greater value uncertainty for the shareholders of Carver Industries as in stock acquisition ,The uncertainity is shared with selling shareholders .
The Risk is shared in proposition of new company share as they are tied up with the fluctuations in the value of new company. They are always exposed to the risks of new company unless the sell their shares.
There is complete value certainity in Cash payments as it is a fixed amount upfront.But in stock payments the risk is tied with the value of new shares.
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Carver Industries, a news media company, is being bought
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