Question 1

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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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-DLM& Firm A will purchase Firm B by offering

Question 4

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

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 
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 8

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 
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 9

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 10

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 11

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

Question 12

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 
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 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

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

Question 16

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 17

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 
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 18

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 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 
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

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

Accepted Answer

A) True 
 B)False

Exam 23: Options

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

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

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.

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

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

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

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

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

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?

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

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

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?

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

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

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?

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

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

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

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

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

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 Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Risk Management

Conclusion

What We Do and Do Not Know About Finance

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