When the market value of a company's common stock is below the replacement value of the firm's net assets, this company is frequently referred to as a possible ____.
A) white knight
B) leveraged buyout
C) takeover candidate
D) conglomerate

Question

Quizplus · Accepted Answer

When the market value of a company's common stock is below the replacement value of the firm's net assets, it becomes an attractive target for a takeover. This is because the acquirer can purchase the company at a lower price than it would cost to replicate its assets, and potentially make a profit by improving its operations or selling off its assets. Therefore, such a company is frequently referred to as a possible takeover candidate.

When the Market Value of a Company's Common Stock Is