Question 1

If Microsoft acquires Apple Computer, it will be an example of a:

Accepted Answer

A)  Vertical merger
B)  Horizontal merger
C)  Conglomerate merger
D)  Distribution-channel merger

Question 2

The shareholders of firm A have offered one million shares valued at $10 each to acquire firm B After the merger is announced, stock A trades for $9 per share.Which of the following statements is not correct?

Accepted Answer

A)  Firm A appears to have overbid for firm B
B)  The NPV of the merger may differ from expectations
C)  Shareholders of A absorb all additional "cost"
D)  A's stockholders are better off than if the merger were cash financed for $10 million

Question 3

A proxy is a method by which a shareholder can allow another shareholder to vote his/her shares.

Accepted Answer

A) True 
 B)False

Question 4

After analyzing the particulars of Firms A and B and their proposed merger, comment on the desirability of the merger:
A.The merged firms are expected to be worth $26,000.Be sure to mention EPS of the merged entity, etc.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Firm A will purchase Firm B by offering...

Question 5

A "poison pill" is a generous retirement package for current management, implemented after a hostile takeover.

Accepted Answer

A) True 
 B)False

Question 6

In general, shareholders of the target firm benefit from takeovers.

Accepted Answer

A) True 
 B)False

Question 7

For firms in a mature stage of life with free cash flow, do you accept the charge that there might be some actual incentive to waste cash?

Accepted Answer

Firms with excess cash know that they mi...

Question 8

Which of the following statements is correct for a firm that has undergone a leveraged buyout?

Accepted Answer

A)  Its shares are traded publicly
B)  Its capital is mostly equity financed
C)  Its shares are not traded publicly
D)  It has a larger shareholder base

Question 9

Shares of a corporation can, under certain circumstances, be priced at different amounts to different investors under the terms of a:

Accepted Answer

A)  Proxy agreement
B)  Public tender offer
C)  Poison pill
D)  Shark repellent

Question 10

Firm B's one million shares of stock currently sell for $20 each.Firm A estimates the economic gain from the merger to be $10 million and is prepared to offer $22 cash for each share of B What% of the merger gain will be captured by firm B's shareholders?

Accepted Answer

A)  20.00%
B)  33.33%
C)  50.00%
D)  60.00% Economic gain = $10 million

Question 11

Generally, a shareholder in the firm that is being acquired gains the most from a corporate merger.

Accepted Answer

A) True 
 B)False

Question 12

In which of the following ways can the management teams of many corporations influence the board of directors?

Accepted Answer

A)  By merging with another firm
B)  Through appointment of shareholders to replace current board members
C)  Through management's nomination of board candidates
D)  By declaring a liquidating cash dividend

Question 13

A tender offer is an agreement between the management and shareholders of a firm to buy back its own shares.

Accepted Answer

A) True 
 B)False

Question 14

The proliferation of junk bonds in the 1980s greatly increased the feasibility of LBOs.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following methods is the least likely to provide a change of corporate management?

Accepted Answer

A)  Successful proxy fight
B)  Voluntary resignation of all managers
C)  Leveraged buyout of the firm
D)  Merger or acquisition

Question 16

Other things equal, which of the following groups of stakeholders should expect to lose value as a result of an LBO?

Accepted Answer

A)  Selling shareholders
B)  Buying shareholders
C)  Bondholders
D)  Investment bankers

Question 17

The "Bootstrap Game" is played somewhat in defiance of traditional merger logic in that it:

Accepted Answer

A)  Provides immediate benefit through improved management
B)  Does not offer a positive NPV from the merger
C)  Stays in effect only until EPS are increased
D)  Does not require the approval of a majority of shareholders

Question 18

Leveraged buyouts are acquisitions where a large fraction of the purchase price is financed with debt.

Accepted Answer

A) True 
 B)False

Question 19

A tender offer is one in which the firm's:

Accepted Answer

A)  Management offers to sell the company to an acquirer
B)  Board of directors offers to sell the company to the public
C)  Shareholders are propositioned to sell their shares to outsiders
D)  Management offers to buy all outstanding shares of the corporation

Question 20

The shares of an acquired firm typically trade for a higher value on the open market after an LBO.

Accepted Answer

A) True 
 B)False

Exam 23: Options

A proxy is a method by which a shareholder can allow another shareholder to vote his/her shares.

Correct AnswerverifiedShow Answer

Leveraged buyouts are acquisitions where a large fraction of the purchase price is financed with debt.

Correct AnswerverifiedShow Answer

A tender offer is an agreement between the management and shareholders of a firm to buy back its own shares.

Correct AnswerverifiedShow Answer

Which of the following statements is correct for a firm that has undergone a leveraged buyout?

Correct AnswerverifiedShow Answer

A tender offer is one in which the firm's:

Correct AnswerverifiedShow Answer

For firms in a mature stage of life with free cash flow, do you accept the charge that there might be some actual incentive to waste cash?

Correct AnswerverifiedFirms with excess cash know that they mi...View AnswerShow Answer

Shares of a corporation can, under certain circumstances, be priced at different amounts to different investors under the terms of a:

Correct AnswerverifiedShow Answer

The shareholders of firm A have offered one million shares valued at $10 each to acquire firm B After the merger is announced, stock A trades for $9 per share.Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Firm B's one million shares of stock currently sell for $20 each.Firm A estimates the economic gain from the merger to be $10 million and is prepared to offer $22 cash for each share of B What% of the merger gain will be captured by firm B's shareholders?

Correct AnswerverifiedShow Answer

In which of the following ways can the management teams of many corporations influence the board of directors?

Correct AnswerverifiedShow Answer

Other things equal, which of the following groups of stakeholders should expect to lose value as a result of an LBO?

Correct AnswerverifiedShow Answer

The proliferation of junk bonds in the 1980s greatly increased the feasibility of LBOs.

Correct AnswerverifiedShow Answer

In general, shareholders of the target firm benefit from takeovers.

Correct AnswerverifiedShow Answer

Generally, a shareholder in the firm that is being acquired gains the most from a corporate merger.

Correct AnswerverifiedShow Answer

After analyzing the particulars of Firms A and B and their proposed merger, comment on the desirability of the merger: A.The merged firms are expected to be worth $26,000.Be sure to mention EPS of the merged entity, etc.

Correct Answerverified Firm A will purchase Firm B by offering...View AnswerShow Answer

The "Bootstrap Game" is played somewhat in defiance of traditional merger logic in that it:

Correct AnswerverifiedShow Answer

Which of the following methods is the least likely to provide a change of corporate management?

Correct AnswerverifiedShow Answer

If Microsoft acquires Apple Computer, it will be an example of a:

Correct AnswerverifiedShow Answer

The shares of an acquired firm typically trade for a higher value on the open market after an LBO.

Correct AnswerverifiedShow Answer

A "poison pill" is a generous retirement package for current management, implemented after a hostile takeover.

Correct AnswerverifiedShow Answer

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Firms with excess cash know that they mi...
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Firm A will purchase Firm B by offering...
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