In the case of RJR Nabisco LBO, the gain in market value RJR stockholders were several times more than:
A) estimated value of additional interest tax shields generated by the LBO
B) estimated losses to RJR bondholders as result of drastic decline in bond ratings
C) (A) and (B) combined
D) none of the above

Question

Quizplus · Accepted Answer

The gain in market value for RJR stockholders was significantly higher than both the estimated value of additional interest tax shields and the estimated losses to bondholders combined, due to the premium paid in the leveraged buyout.

In the Case of RJR Nabisco LBO, the Gain in Market