Ace Computers is a computer manufacturer. Jack of All Trades Software

QUESTION

Ace Computers is a computer manufacturer. Jack of All Trades Software Company wants to buy Ace and sell the Ace Computers loaded with their own software.

Ace wants to continue to allow users to decide which company’s software to load into their own computers. Jack of All Trades is trying to buy as much of Ace’s stock as it can get. Meanwhile, Ace has decided to open two more factories to make more computers. Why would Ace make such a decision at this time?
A) because Ace wants to find proxy voters who will help Jack of All Trades with the takeover
B) to make its shareholders think the stock is worth more than it actually is by getting the shareholders to think the company has more money than it has
C) because Ace thinks it can find buyers for many more computers than it has been selling all along
D) to make the company take on debt that would make it less attractive to Jack of All Trades
E) because Ace wants to take on more employees in hopes that the employees will attempt an employee buyout

ANSWER

Answer: D
Explanation: D) Taking on more debt to make the company less attractive is called launching a poison pill. It is a common technique to try to avoid a hostile takeover.