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TRUE OR FALSE Retiring long-term debt early to reduce total debt on the balance sheet will...

TRUE OR FALSE

Retiring long-term debt early to reduce total debt on the balance sheet will help managers defend against a hostile takeover.

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Answer #1

False.

Retiring long-term debt early to reduce total debt on the balance sheet will not help managers defend against a hostile takeover, rather it will make the Target Co more attractive as the Co is leverage free and there are no interest obligation on the co. So to prevent the hostile takeover the target co may issue more equity or they may also use Poison Pill techinique to avoid unwanted mergers.

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