Which of the following is/are way(s )that short-term market deviations from a particular company's intrinsic value might play a role in the decisions of the managers?
I.When making acquisitions,a manager might pay with shares instead of cash when the stock market overprices the shares relative to intrinsic value.
II.If the multiples in a particular sector are too high,a manager of a firm that owns a subsidiary in that industry might consider divesting the subsidiary.
III.If the multiples in a particular sector are too low,a manager of a firm that owns a subsidiary in that industry might consider divesting the subsidiary.
IV.When making acquisitions,a manager might pay with cash instead of shares when the stock market overprices the shares relative to intrinsic value.

Question

Quizplus · Accepted Answer

I and II are correct because they describe strategic decisions managers might make based on the market's short-term deviations from a company's intrinsic value. In scenario I, using overpriced shares as currency for acquisitions is a way to capitalize on the market's higher valuation. In scenario II, divesting a subsidiary when sector multiples are high can maximize the return from the sale.

Which of the Following Is/are Way(s )That Short-Term Market Deviations