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When a firm repurchases shares, the supply of shares is ________, but at the same time, the value of the firm’s assets ________.  

Brutus Co. has nine million shares outstanding, generates free cash flows of $10 million each year and has a cost of capital of 7%. It also has $50 million of cash on hand. Managers at Brutus are deciding whether to distribute the $50 million in cash to shareholders through a repurchase or invest the $50 million in a project that generates $4 million in free cash flow in perpetuity. Should mangers invest in this project or repurchase shares?

You work for a levered buyout firm and are evaluating a potential buyout of TTUN Inc. TTUN’s stock price is $20, and it has 4 million shares outstanding. You believe that if you buy the company and replace its dismal management team, its value will increase by 80%. You are planning on doing a levered buyout of TTUN and will offer $23 per share for control of the company. Will shareholders sell their shares and how much equity will you own if improvements are made?

For a hostile takeover to succeed, the acquirer must appeal to the target shareholders; this is usually done through ________.

A rights offering that gives existing target shareholders the right to buy shares in either the target or an acquirer at a deeply discounted price once certain conditions are met is called a ________.

Savings that come from combining the marketing and distribution of different types of related products are called ________.

You work for a levered buyout firm and are evaluating a potential buyout of TTUN Inc. TTUN’s stock price is $20, and it has 4 million shares outstanding. You believe that if you buy the company and replace its dismal management team, its value will increase by 40%. You are planning on doing a levered buyout of TTUN and will offer $25 per share for control of the company. Will shareholders sell their shares and how much equity will you own if improvements are made?

Brutus Co. expects an EPS of $10 per share next period. Currently, their plowback ratio is 0.5. However, the company has the opportunity to finance a new project that will earn an ROE of 12% by cutting its dividend to $2.50 per share. If the Brutus Co’s expected stock return is 9%, should they cut dividends to make the new investment?

Corporate payout policy refers to:

Brutus Manufacturing has earnings per share (EPS) of $2.00, 4 million shares outstanding, and a share price of $30.  Brutus is considering buying Fisher Industries, which has earnings per share of $1.80, 2 million shares outstanding, and a share price of $15. Brutus will pay for Fisher by issuing new shares. There are no expected synergies from the transaction. If Brutus pays no premium to acquire Fisher, what will the earnings per share be after the merger?