Question 1

The merger between Chase Manhattan and Chemical bank is an example of:

Accepted Answer

A)  Vertical merger. 
B)  Horizontal merger. 
C)  Conglomerate merger. 
D)  Direct merger. 
A)  Vertical merger. 
B)  Horizontal merger. 
C)  Conglomerate merger. 
D)  Direct merger.

Question 2

Changes in corporate charter designed to deter an unwelcome takeover 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 3

In merger terminology,a white knight is:

Accepted Answer

A)  any suitor willing to bid more than the current share price for a firm. 
B)  the successful bidder in a merger process. 
C)  a suitor who acquires with cash rather than with stock. 
D)  a friendly acquirer that will out-bid a hostile acquirer. 
A)  any suitor willing to bid more than the current share price for a firm. 
B)  the successful bidder in a merger process. 
C)  a suitor who acquires with cash rather than with stock. 
D)  a friendly acquirer that will out-bid a hostile acquirer.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

The market for corporate control suggests that:

Accepted Answer

A)  management and ownership make a large difference in a firm's results. 
B)  it is rare for mergers to show economic benefits over a sustained period. 
C)  hostile takeovers generate the most in additional value. 
D)  LBOs cost more than they are worth. 
A)  management and ownership make a large difference in a firm's results. 
B)  it is rare for mergers to show economic benefits over a sustained period. 
C)  hostile takeovers generate the most in additional value. 
D)  LBOs cost more than they are worth.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a takeover defence?

Accepted Answer

A)  Shark repellant 
B)  Poison pill 
C)  White knight 
D)  Proxy contest 
A)  Shark repellant 
B)  Poison pill 
C)  White knight 
D)  Proxy contest

Question 8

Proxy fights are conducted in order to achieve a goal of:

Accepted Answer

A)  changing the corporate charter. 
B)  bringing about economies of scale. 
C)  replacing the current board and management team. 
D)  having a public tender offer. 
A)  changing the corporate charter. 
B)  bringing about economies of scale. 
C)  replacing the current board and management team. 
D)  having a public tender offer.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Question 11

A spin-off is an action in which:

Accepted Answer

A)  the management bids for and acquires the firm. 
B)  one firm issues stock to acquire another firm. 
C)  successful product lines are sold to competitors. 
D)  a portion of the firm's assets are sold off to form a new company. 
A)  the management bids for and acquires the firm. 
B)  one firm issues stock to acquire another firm. 
C)  successful product lines are sold to competitors. 
D)  a portion of the firm's assets are sold off to form a new company.

Question 12

Briefly discuss some of the more sensible reasons for mergers to occur.

Accepted Answer

The overriding reason for mergers to occ

Question 13

Why might shareholders of an acquiring firm prefer to finance mergers with stock rather than with cash?

Accepted Answer

A)  Stock financing is always less costly due to tax consequences 
B)  EPS fall when mergers are financed with cash 
C)  Target-firm shareholders will bear part of the cost if merger benefits were overestimated 
D)  All merger gains go to the acquirer when financed with stock 
A)  Stock financing is always less costly due to tax consequences 
B)  EPS fall when mergers are financed with cash 
C)  Target-firm shareholders will bear part of the cost if merger benefits were overestimated 
D)  All merger gains go to the acquirer when financed with stock

Question 14

Who is typically the primary beneficiary(ies)in a merger?

Accepted Answer

While there are certainly exceptions to

Question 15

ABC Corp.has offered one million shares having a total market value of $8 million for XYZ Corp.After the merger is announced,shares in ABC trade for $7 each.If ABC is confident about XYZ's value,what has happened to the cost of the merger?

Accepted Answer

A)  It increases by $1 million 
B)  It decreases by $1 million 
C)  It increases by $9 million 
D)  It remains constant 
A)  It increases by $1 million 
B)  It decreases by $1 million 
C)  It increases by $9 million 
D)  It remains constant

Question 16

"Junk bonds" are not very desirable because of the low yields these securities provide.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following motives for mergers make economic sense?

Accepted Answer

A)  To achieve economies of scale 
B)  To reduce risk by diversification 
C)  Merging to redeploy cash 
D)  To increase earnings per share 
A)  To achieve economies of scale 
B)  To reduce risk by diversification 
C)  Merging to redeploy cash 
D)  To increase earnings per share

Question 18

The urge to merge frequently is prompted by more regulation.

Accepted Answer

A) True 
 B)False

Question 19

An acquiring company is considering a takeover of a target company.The acquiring company has 15 million shares outstanding with $30 per share.The target company has 8 million shares outstanding which sell for $24 per share.If the acquiring company estimates that merger gains will be $16 million,determine what the highest price will be paid per share for the target.

Accepted Answer

A)  $24 
B)  $26 
C)  $28 
D)  $30 
A)  $24 
B)  $26 
C)  $28 
D)  $30

Question 20

Tender offers generally require the approval of the target firm's management.

Accepted Answer

A) True 
 B)False

Exam 23: Mergers, Acquisitions, and Corporate Control

The merger between Chase Manhattan and Chemical bank is an example of:

Changes in corporate charter designed to deter an unwelcome takeover is best defined as:

In merger terminology,a white knight is:

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

The market for corporate control suggests that:

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

Which of the following is not a takeover defence?

Proxy fights are conducted in order to achieve a goal of:

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

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

A spin-off is an action in which:

Briefly discuss some of the more sensible reasons for mergers to occur.

Why might shareholders of an acquiring firm prefer to finance mergers with stock rather than with cash?

Who is typically the primary beneficiary(ies)in a merger?

ABC Corp.has offered one million shares having a total market value of $8 million for XYZ Corp.After the merger is announced,shares in ABC trade for $7 each.If ABC is confident about XYZ's value,what has happened to the cost of the merger?

"Junk bonds" are not very desirable because of the low yields these securities provide.

Which of the following motives for mergers make economic sense?

The urge to merge frequently is prompted by more regulation.

Tender offers generally require the approval of the target firm's management.

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