Question 1

Business valuation is as much of an art as it is a science.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following are desirable characteristics of targets?

Accepted Answer

A)  Rapidly growing cash flows and earnings 
B)  Low P/E ratios 
C)  Market value less than book value 
D)  All the above True or False Questions 
A)  Rapidly growing cash flows and earnings 
B)  Low P/E ratios 
C)  Market value less than book value 
D)  All the above True or False Questions D

Question 3

In thin markets float shares are not as plentiful.

Accepted Answer

A) True 
 B)False  True

Question 4

For many years the concentrated holdings by large block holders made hostile takeovers in Europe more difficult to complete.

Accepted Answer

A) True 
 B)False

Question 5

For a company with positive debt:

Accepted Answer

A)  Enterprise value is less then equity value 
B)  Enterprise value equals equity value 
C)  Enterprise value is more than equity value 
D)  None of the above 
A)  Enterprise value is less then equity value 
B)  Enterprise value equals equity value 
C)  Enterprise value is more than equity value 
D)  None of the above

Question 6

In bear markets, control premiums (relative to current market prices) may rise.

Accepted Answer

A) True 
 B)False

Question 7

Research by Kaplan and Ruback found that:

Accepted Answer

A)  Median estimates of the DCF were within 10% of the market values 
B)  Comparable multiples yielded significantly higher values than DCF measures 
C)  Comparable multiples yielded significantly lower values than DCF measures 
D)  None of the above 
A)  Median estimates of the DCF were within 10% of the market values 
B)  Comparable multiples yielded significantly higher values than DCF measures 
C)  Comparable multiples yielded significantly lower values than DCF measures 
D)  None of the above

Question 8

The discount rate used to discount future cash flows should:

Accepted Answer

A)  Be equal to yield on long-term U.S. Treasuries 
B)  Be 2% greater than yield on long-term U.S. Treasuries 
C)  Incorporate a risk premium equal to perceived risks and volatility of future cash flow stream 
D)  Usually will be 1% greater than yield on high-yield bonds 
A)  Be equal to yield on long-term U.S. Treasuries 
B)  Be 2% greater than yield on long-term U.S. Treasuries 
C)  Incorporate a risk premium equal to perceived risks and volatility of future cash flow stream 
D)  Usually will be 1% greater than yield on high-yield bonds

Question 9

Which of the following is true:

Accepted Answer

A)  FCF = EBITDA - CE - CWC + CTP 
B)  FCF = EBITDA - CE - CWC - CTP 
C)  FCF = EBITDA - CE + CWC + CTP 
D)  None of the above 
A)  FCF = EBITDA - CE - CWC + CTP 
B)  FCF = EBITDA - CE - CWC - CTP 
C)  FCF = EBITDA - CE + CWC + CTP 
D)  None of the above

Question 10

For the bidder to enjoy an increase in EPS following a series of acquisitions, and in effect, play the P/E game, the following must be true:

Accepted Answer

A)  Post-deal P/E ratio must not decline 
B)  Acquirer must pay continually lower premiums with each deal 
C)  The bidder must make fewer deals over time 
D)  None of the above 
A)  Post-deal P/E ratio must not decline 
B)  Acquirer must pay continually lower premiums with each deal 
C)  The bidder must make fewer deals over time 
D)  None of the above

Question 11

Continuing value and exit value mean the same thing.

Accepted Answer

A) True 
 B)False

Question 12

The net effect of arbitrage buying is to increase the price while also increasing the probability that the company will be taken over.

Accepted Answer

A) True 
 B)False

Question 13

Moeller, Schlingemann, and Stulz's research shows that during the period 1998-2001, acquiring firm shareholders gained a total of $240 billion!

Accepted Answer

A) True 
 B)False

Question 14

When multiples are derived from an analysis of historical earnings, they are referred to as trailing multiples.

Accepted Answer

A) True 
 B)False

Question 15

Answer: In Rau and Vermaelen's research, glamour firms have high book to market value ratios.

Accepted Answer

A) True 
 B)False

Question 16

Research by Roach showed:

Accepted Answer

A)  Merger premiums have risen over time 
B)  Strategic mergers provide more synergistic benefits 
C)  Strategic focus is not a determinant of merger premiums 
D)  All the above 
E)  Both a and b 
A)  Merger premiums have risen over time 
B)  Strategic mergers provide more synergistic benefits 
C)  Strategic focus is not a determinant of merger premiums 
D)  All the above 
E)  Both a and b

Question 17

Acquiring firm shareholders tend to earn zero or negative returns from mergers.

Accepted Answer

A) True 
 B)False

Business valuation is as much of an art as it is a science.

Which of the following are desirable characteristics of targets?

In thin markets float shares are not as plentiful.

For many years the concentrated holdings by large block holders made hostile takeovers in Europe more difficult to complete.

For a company with positive debt:

In bear markets, control premiums (relative to current market prices) may rise.

Research by Kaplan and Ruback found that:

The discount rate used to discount future cash flows should:

Which of the following is true:

For the bidder to enjoy an increase in EPS following a series of acquisitions, and in effect, play the P/E game, the following must be true:

Continuing value and exit value mean the same thing.

The net effect of arbitrage buying is to increase the price while also increasing the probability that the company will be taken over.

Moeller, Schlingemann, and Stulz's research shows that during the period 1998-2001, acquiring firm shareholders gained a total of $240 billion!

When multiples are derived from an analysis of historical earnings, they are referred to as trailing multiples.

Answer: In Rau and Vermaelen's research, glamour firms have high book to market value ratios.

Research by Roach showed:

Acquiring firm shareholders tend to earn zero or negative returns from mergers.

Introduction

History of Mergers

Legal Framework

Merger Strategy

Antitakeover Measures

Takeover Tactics

Hedge Funds As Activist Investors

Going-Private Transactions and Leveraged Buyouts

The Private Equity Market

The Junk Bond and the Leveraged Loan Market and Stapled Financing

Corporate Restructuring

Restructuring in Bankruptcy

Corporate Governance

Joint Ventures and Strategic Alliances

Tax Issues in Mergers Acquisitions

Filters

Exam 15: Valuation

Business valuation is as much of an art as it is a science.

Which of the following are desirable characteristics of targets?

In thin markets float shares are not as plentiful.

For many years the concentrated holdings by large block holders made hostile takeovers in Europe more difficult to complete.

For a company with positive debt:

In bear markets, control premiums (relative to current market prices) may rise.

Research by Kaplan and Ruback found that:

The discount rate used to discount future cash flows should:

Which of the following is true:

For the bidder to enjoy an increase in EPS following a series of acquisitions, and in effect, play the P/E game, the following must be true:

Continuing value and exit value mean the same thing.

The net effect of arbitrage buying is to increase the price while also increasing the probability that the company will be taken over.

Moeller, Schlingemann, and Stulz's research shows that during the period 1998-2001, acquiring firm shareholders gained a total of $240 billion!

When multiples are derived from an analysis of historical earnings, they are referred to as trailing multiples.

Answer: In Rau and Vermaelen's research, glamour firms have high book to market value ratios.

Research by Roach showed:

Acquiring firm shareholders tend to earn zero or negative returns from mergers.

Introduction

History of Mergers

Legal Framework

Merger Strategy

Antitakeover Measures

Takeover Tactics

Hedge Funds As Activist Investors

Going-Private Transactions and Leveraged Buyouts

The Private Equity Market

The Junk Bond and the Leveraged Loan Market and Stapled Financing

Corporate Restructuring

Restructuring in Bankruptcy

Corporate Governance

Joint Ventures and Strategic Alliances

Tax Issues in Mergers Acquisitions

Filters