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

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GMAT Club Legend
Joined: 07 Jul 2004
Posts: 5037

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Location: Singapore
To avoid a hostile takeover attempt, the board of directors [#permalink]

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07 Sep 2005, 07:03
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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.

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Manager
Joined: 31 Jul 2005
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07 Sep 2005, 09:19
c over e. I like the mandatory health insurance for children (increased demand for core product) vs lower cost of paper (complementary business & no mention of demand).

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Senior Manager
Joined: 11 May 2004
Posts: 454

Kudos [?]: 52 [0], given: 0

Location: New York

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07 Sep 2005, 09:30
C

Everything else would cause a negative effect on what the company is doing.

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Manager
Joined: 28 Jan 2004
Posts: 198

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Location: Ghana

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08 Sep 2005, 01:41
C for me.
_________________

It's not over until it's OVER!

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Senior Manager
Joined: 15 Aug 2005
Posts: 257

Kudos [?]: 4 [0], given: 0

Location: Las Vegas, NV

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08 Sep 2005, 09:40
C works best because the plan hinges on the business' forecast of increased insurance rates.

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Intern
Joined: 30 Aug 2005
Posts: 26

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Location: Pattikadu

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08 Sep 2005, 10:16
clear C, an easy one

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SVP
Joined: 16 Oct 2003
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08 Sep 2005, 10:21
C is the only one enhancing revenue.

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SVP
Joined: 28 May 2005
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08 Sep 2005, 15:34
My pick is C
_________________

hey ya......

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Senior Manager
Joined: 27 Aug 2005
Posts: 331

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Location: Montreal, Canada

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08 Sep 2005, 19:31
I stopped reading after seeing the words "chocolate factory" and then pausing to eat some chocolate.

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Manager
Joined: 01 Jun 2005
Posts: 69

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09 Sep 2005, 04:46
C for me.

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Director
Joined: 05 Jul 2004
Posts: 893

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09 Sep 2005, 05:10
(C). Main focus is to increase revenues from health insurance.

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GMAT Club Legend
Joined: 07 Jul 2004
Posts: 5037

Kudos [?]: 436 [0], given: 0

Location: Singapore

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10 Sep 2005, 05:26
OA is C.

Kudos [?]: 436 [0], given: 0

10 Sep 2005, 05:26
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# To avoid a hostile takeover attempt, the board of directors

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