FNC 345: Answers to homework for Chapter 21 Mergers and Acquisitions
If a firm has a shortage of internal investment opportunities compared with its free cash flow,
(1) it can pay an extra dividend, (2) repurchase its own stock (3) purchase some stock or
14-1) Changes in sales cause changes in profits. Would the profit change associated with sales changes
be larger or smaller if a firm increased its operating leverage? Explain your answer.
Ans: Operating Leverage is the extent to which fixed