Question 1

The most likely interpretation of headlines that read,"ABC Corp.adopts shark repellent" is that:

Accepted Answer

A)  ABC wants to increase the difficulty of a takeover. 
B)  ABC has made a tender offer for the shares of another firm. 
C)  ABC will only merge with small-sized partners. 
D)  ABC Corp. desires to reduce the costs of being acquired. 
A)  ABC wants to increase the difficulty of a takeover. 
B)  ABC has made a tender offer for the shares of another firm. 
C)  ABC will only merge with small-sized partners. 
D)  ABC Corp. desires to reduce the costs of being acquired.

Question 2

Agency cost occurs when managers or directors take actions adverse to shareholders' interest.

Accepted Answer

A) True 
 B)False

Question 3

The value of the target firm's bonds goes down when a leveraged buyout is announced.

Accepted Answer

A) True 
 B)False

Question 4

In certain circumstances,the competition tribunal will allow a merger that substantially lessens competition.

Accepted Answer

A) True 
 B)False

Question 5

Provide several synergistic motives for merging.

Accepted Answer

Increased revenues; economies

Question 6

Economies of vertical integration are one possible source of synergy in mergers.

Accepted Answer

A) True 
 B)False

Question 7

A public offer to purchase the shares of existing shareholders in order to take the firm over is called a:

Accepted Answer

A)  Tender offer. 
B)  Greenmail attempt. 
C)  Spin-off. 
D)  Divestiture. 
A)  Tender offer. 
B)  Greenmail attempt. 
C)  Spin-off. 
D)  Divestiture.

Question 8

When a management team buys the firm from current shareholders while continuing to manage and often incurring large segments of debt,it is known as a:

Accepted Answer

A)  Management buyout. 
B)  Spin-off. 
C)  Successful greenmail attempt. 
D)  Corporate break-up. 
A)  Management buyout. 
B)  Spin-off. 
C)  Successful greenmail attempt. 
D)  Corporate break-up.

Question 9

An economic gain is derived from mergers when two firms are worth more combined than separate.

Accepted Answer

A) True 
 B)False

Question 10

Conglomerate mergers involve companies in:

Accepted Answer

A)  similar lines of business. 
B)  different stages of the corporate lifecycle. 
C)  unrelated lines of business. 
D)  different countries. 
A)  similar lines of business. 
B)  different stages of the corporate lifecycle. 
C)  unrelated lines of business. 
D)  different countries.

Question 11

A tender offer is an attempt by outsiders to buy the stock of the target firm's shareholders with the help of target firm's managers.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is correct concerning a spin-off?

Accepted Answer

A)  A division of a firm is reconstituted as a new firm 
B)  An unprofitable division is divested 
C)  A division of a firm is bought by its managers 
D)  The spin-off generates no free cash flow 
A)  A division of a firm is reconstituted as a new firm 
B)  An unprofitable division is divested 
C)  A division of a firm is bought by its managers 
D)  The spin-off generates no free cash flow

Question 13

If Canfor (lumber products)were to acquire a national homebuilding firm,the combination would be termed a:

Accepted Answer

A)  Horizontal merger. 
B)  Vertical merger. 
C)  Conglomerate merger. 
D)  A spin-off by the national homebuilding firm. 
A)  Horizontal merger. 
B)  Vertical merger. 
C)  Conglomerate merger. 
D)  A spin-off by the national homebuilding firm.

Question 14

Firms with substantial amounts of free-cash-flow often discover that:

Accepted Answer

A)  conglomerate mergers are the best use for the funds. 
B)  accounting profits are what truly matter. 
C)  they have become takeover targets. 
D)  their capital budgets have been too low. 
A)  conglomerate mergers are the best use for the funds. 
B)  accounting profits are what truly matter. 
C)  they have become takeover targets. 
D)  their capital budgets have been too low.

Question 15

Which of the following statements is correct concerning the cost of two firms merging? The cost:

Accepted Answer

A)  is fixed when the merger is financed with cash. 
B)  can be affected by post-merger gains if cash is used. 
C)  decreases as the post-merger share price increases when stock is used to finance the merger. 
D)  is not determined until after the merger, regardless of the type of financing. 
A)  is fixed when the merger is financed with cash. 
B)  can be affected by post-merger gains if cash is used. 
C)  decreases as the post-merger share price increases when stock is used to finance the merger. 
D)  is not determined until after the merger, regardless of the type of financing.

Question 16

The benefits of merger is easier when the merging companies:

Accepted Answer

A)  have different computer systems. 
B)  have different pay structures. 
C)  have different resources. 
D)  have different company cultures. 
A)  have different computer systems. 
B)  have different pay structures. 
C)  have different resources. 
D)  have different company cultures.

Question 17

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 18

Firms that are acquired to take advantage of bootstrapping often have:

Accepted Answer

A)  a lower price-earnings ratio than the acquirer. 
B)  a higher price-earnings ratio than the acquirer. 
C)  more outstanding shares than the acquirer. 
D)  a higher market valuation than the acquirer. 
A)  a lower price-earnings ratio than the acquirer. 
B)  a higher price-earnings ratio than the acquirer. 
C)  more outstanding shares than the acquirer. 
D)  a higher market valuation than the acquirer.

Question 19

When shareholders are issued rights to buy shares if a bidder acquires a large stake in the firm is best defined as:

Accepted Answer

A)  Leveraged Buyout. 
B)  Poison Pill. 
C)  Shark Repellent. 
D)  Proxy Contest. 
A)  Leveraged Buyout. 
B)  Poison Pill. 
C)  Shark Repellent. 
D)  Proxy Contest.

Question 20

In the case of a merger that is stock financed,the assumed merger cost may be incorrect if the:

Accepted Answer

A)  value of the acquired firm's shares changes after the merger announcement. 
B)  value of the acquiring firm's shares changes after the merger announcement. 
C)  long-term interest rates increase. 
D)  merger is either horizontal or vertical. 
A)  value of the acquired firm's shares changes after the merger announcement. 
B)  value of the acquiring firm's shares changes after the merger announcement. 
C)  long-term interest rates increase. 
D)  merger is either horizontal or vertical.

Exam 23: Mergers, Acquisitions, and Corporate Control

The most likely interpretation of headlines that read,"ABC Corp.adopts shark repellent" is that:

Agency cost occurs when managers or directors take actions adverse to shareholders' interest.

The value of the target firm's bonds goes down when a leveraged buyout is announced.

In certain circumstances,the competition tribunal will allow a merger that substantially lessens competition.

Provide several synergistic motives for merging.

Economies of vertical integration are one possible source of synergy in mergers.

A public offer to purchase the shares of existing shareholders in order to take the firm over is called a:

When a management team buys the firm from current shareholders while continuing to manage and often incurring large segments of debt,it is known as a:

An economic gain is derived from mergers when two firms are worth more combined than separate.

Conglomerate mergers involve companies in:

A tender offer is an attempt by outsiders to buy the stock of the target firm's shareholders with the help of target firm's managers.

Which of the following is correct concerning a spin-off?

If Canfor (lumber products)were to acquire a national homebuilding firm,the combination would be termed a:

Firms with substantial amounts of free-cash-flow often discover that:

Which of the following statements is correct concerning the cost of two firms merging? The cost:

The benefits of merger is easier when the merging companies:

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

Firms that are acquired to take advantage of bootstrapping often have:

When shareholders are issued rights to buy shares if a bidder acquires a large stake in the firm is best defined as:

In the case of a merger that is stock financed,the assumed merger cost may be incorrect if the:

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, IPOs, and Seasoned Offerings

Debt and Payout Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

International Financial Management

Options

Risk Management

Filters