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# To avoid a hostile takeover attempt, the board of directors

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VP
Joined: 21 Mar 2006
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To avoid a hostile takeover attempt, the board of directors [#permalink]

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06 Oct 2006, 22:06
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To avoid a hostile takeover attempt, the board of directors of Wellco, Inc., a provider of life and health insurance, planned to take out large loans and use them to purchase a publishing company, a chocolate factory, and a nationwide chain of movie theaters. The directors anticipated that these purchase initially would plunge the corporation deep into debt, rendering it unattractive to those who wanted to take it over, but that steadily rising insurance rates would allow the company to pay off the debt within five years. Meanwhile, revenues from the three new businesses would enable the corporation as a whole to continue to meet its increased operating expenses. Ultimately, according o the directorsâ€™ plan, the diversification would strengthen the corporation by varying the sources and schedules of its annual revenues.
Which of the following, assuming that all are equally possible, would most enhance the chances of the planâ€™s success?
(A) A widespread drought decreases the availability of cacao beans, from which chocolate is manufacture, diving up chocolate prices worldwide.
(B) New government regulations require a 30 percent across-the-board rate rollback of all insurance companies, to begin immediately and to be completed within a five-year period.
(C) Congress enacts a statute, effective after six months, making it illegal for any parent not to carry health insurance coverage for his or her child.
(D) Large-screen televisions drop dramatically in price due to surprise alterations in trade barriers with Japan; movie theater attendance dwindles as a consequence.
(E) A new, inexpensive process is discovered for making paper pulp, and paper prices fall to 60 percent of their former level.
Senior Manager
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Re: CR1000 - Wellco Inc. [#permalink]

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06 Oct 2006, 23:15
kripalkavi wrote:
To avoid a hostile takeover attempt, the board of directors of Wellco, Inc., a provider of life and health insurance, planned to take out large loans and use them to purchase a publishing company, a chocolate factory, and a nationwide chain of movie theaters. The directors anticipated that these purchase initially would plunge the corporation deep into debt, rendering it unattractive to those who wanted to take it over, but that steadily rising insurance rates would allow the company to pay off the debt within five years. Meanwhile, revenues from the three new businesses would enable the corporation as a whole to continue to meet its increased operating expenses. Ultimately, according o the directorsâ€™ plan, the diversification would strengthen the corporation by varying the sources and schedules of its annual revenues.
Which of the following, assuming that all are equally possible, would most enhance the chances of the planâ€™s success?
(A) A widespread drought decreases the availability of cacao beans, from which chocolate is manufacture, diving up chocolate prices worldwide.
(B) New government regulations require a 30 percent across-the-board rate rollback of all insurance companies, to begin immediately and to be completed within a five-year period.
(C) Congress enacts a statute, effective after six months, making it illegal for any parent not to carry health insurance coverage for his or her child.
(D) Large-screen televisions drop dramatically in price due to surprise alterations in trade barriers with Japan; movie theater attendance dwindles as a consequence.
(E) A new, inexpensive process is discovered for making paper pulp, and paper prices fall to 60 percent of their former level.

Kripal question been discussed before.Chk the archives.
I think its (C).The whole plan hinges on whether the debt can be paid back.if the statute is passed,the insurance will be able to pay back the debt.
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VP
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06 Oct 2006, 23:56
yeah...C is my choice too...the success of plan depends on the ability of the company to pay-off the debt.
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VP
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07 Oct 2006, 00:14
thanks sangarelli. Will check the archives.
Director
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07 Oct 2006, 01:46
Easy C.
All other choices would clearly hurt company's plans.
Current Student
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07 Oct 2006, 04:03
The difficult hurdle in this CR is the sheer volume of info that one has to read through in under two minutes. Otherwise, the answer choices presented really aren't too challenging.
VP
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09 Oct 2006, 04:50
C 2
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