Question 1

Which of the following does not influence the degree of competition in takeovers?

Accepted Answer

A) The use of defensive strategies by target companies. 
B) Changes in government regulation. 
C) Development of innovative financing techniques. 
D) None of the given options. 
A) The use of defensive strategies by target companies. 
B) Changes in government regulation. 
C) Development of innovative financing techniques. 
D) None of the given options. D

Question 2

A leveraged buyout occurs where:

Accepted Answer

A) a company or division is purchased by a small group of investors,including its management. 
B) a company employs a selective buyback to purchase the shareholding of a major shareholder. 
C) a company or division is purchased by a small group of investors involving large amounts of debt. 
D) assets,including a division,are sold to another company. 
A) a company or division is purchased by a small group of investors,including its management. 
B) a company employs a selective buyback to purchase the shareholding of a major shareholder. 
C) a company or division is purchased by a small group of investors involving large amounts of debt. 
D) assets,including a division,are sold to another company. C

Question 3

A possible reason for little effect on the wealth of acquiring-company shareholders in reaction to a takeover announcement even though a takeover might be profitable is:

Accepted Answer

A) the expected gains from the takeover may have already been reflected in the company's share price. 
B) the market is inefficient in impounding such information. 
C) that returns to shareholders may have changed over time. 
D) the takeover is not profitable. 
A) the expected gains from the takeover may have already been reflected in the company's share price. 
B) the market is inefficient in impounding such information. 
C) that returns to shareholders may have changed over time. 
D) the takeover is not profitable. A

Question 4

A ________ is a strategic move by a company to make themselves less attractive to potential acquirers.

Accepted Answer

The answer of A ________ is a strategic move by...

Question 5

Takeover activity is regulated by Chapter 6 of the Corporations Act 2001,which seeks to ensure that:

Accepted Answer

A) the shareholders and directors of an acquiring company know the identity of the target. 
B) the acquisition of control over voting shares in a listed company or an unlisted company with more than 20 members takes place in an efficient,competitive and informed market. 
C) as far as practicable,all shareholders have a reasonable and equal opportunity to participate in any benefits offered by the bidder. 
D) none of the given options. 
A) the shareholders and directors of an acquiring company know the identity of the target. 
B) the acquisition of control over voting shares in a listed company or an unlisted company with more than 20 members takes place in an efficient,competitive and informed market. 
C) as far as practicable,all shareholders have a reasonable and equal opportunity to participate in any benefits offered by the bidder. 
D) none of the given options.

Question 6

Which of the following would shareholders regard as being an unacceptable reason for a takeover?

Accepted Answer

A) Increased market power. 
B) Increase managerial perquisites. 
C) Cost reductions. 
D) Use of excess liquidity or free cash flows. 
A) Increased market power. 
B) Increase managerial perquisites. 
C) Cost reductions. 
D) Use of excess liquidity or free cash flows.

Question 7

Conglomerate takeover can be best defined as a takeover of:

Accepted Answer

A) a target company operating in the same line of business as the acquiring company. 
B) a target company operating in a different line of business. 
C) a company which is a supplier of goods to the acquiring company. 
D) a target company in an unrelated type of business. 
A) a target company operating in the same line of business as the acquiring company. 
B) a target company operating in a different line of business. 
C) a company which is a supplier of goods to the acquiring company. 
D) a target company in an unrelated type of business.

Question 8

A likely shortcoming in valuing a target based on deducting total liabilities from total assets is:

Accepted Answer

A) that balance sheet figures do not represent market values. 
B) intangible assets may not be included in the balance sheet. 
C) there may be complementarity between assets. 
D) all of the given options. 
A) that balance sheet figures do not represent market values. 
B) intangible assets may not be included in the balance sheet. 
C) there may be complementarity between assets. 
D) all of the given options.

Question 9

Which of the following takeovers are most likely to be motivated by management inefficiency?

Accepted Answer

A) Horizontal takeover. 
B) Vertical takeover. 
C) Conglomerate takeover. 
D) All of the given options. 
A) Horizontal takeover. 
B) Vertical takeover. 
C) Conglomerate takeover. 
D) All of the given options.

Question 10

Which of the following statements is false?

Accepted Answer

A) A spin-off implies that the target is worth more to the acquiring company than it was worth to its previous shareholders. 
B) Cost savings can be achieved in a vertical takeover. 
C) The free cash flow theory shows how some takeovers are evidence of the conflicts of interest between shareholders and managers,while others are a response to the problem. 
D) None of the given options. 
A) A spin-off implies that the target is worth more to the acquiring company than it was worth to its previous shareholders. 
B) Cost savings can be achieved in a vertical takeover. 
C) The free cash flow theory shows how some takeovers are evidence of the conflicts of interest between shareholders and managers,while others are a response to the problem. 
D) None of the given options.

Question 11

Which section of the Competition and Consumer Act 2010 prohibits a company from acquiring the shares or assets of another company where the acquisition is likely to result in a substantial lessening of competition in a market?

Accepted Answer

A) Section 52. 
B) Section 50. 
C) Section 51. 
D) Section 53. 
A) Section 52. 
B) Section 50. 
C) Section 51. 
D) Section 53.

Question 12

A positive argument for 'spin offs' is:

Accepted Answer

A) that 'centralising' of business operations leads to better decision-making processes. 
B) that individual entities are likely to be better managed separately than as parts of a complex conglomerate. 
C) that the selling company may benefit from removing diseconomies of scale. 
D) none of the given options. 
A) that 'centralising' of business operations leads to better decision-making processes. 
B) that individual entities are likely to be better managed separately than as parts of a complex conglomerate. 
C) that the selling company may benefit from removing diseconomies of scale. 
D) none of the given options.

Question 13

Which of the following statements is not a conclusion drawn by Jensen (1988)based on US evidence?

Accepted Answer

A) Actions by managers that prevent mergers are the most likely to be harmful to shareholders. 
B) Takeover gains do not result from the creation of monopoly power. 
C) Takeovers often waste credit or resources. 
D) None of the given options. 
A) Actions by managers that prevent mergers are the most likely to be harmful to shareholders. 
B) Takeover gains do not result from the creation of monopoly power. 
C) Takeovers often waste credit or resources. 
D) None of the given options.

Question 14

Cost reductions are the primary purpose that drives most conglomerate takeovers.

Accepted Answer

A) True 
 B)False

Question 15

An acquiring firm cannot use its own shares as consideration in a market takeover bid.

Accepted Answer

A) True 
 B)False

Question 16

The market for corporate control can be defined as:

Accepted Answer

A) a market in which alternative teams of managers compete for the right to control corporate assets and make top-level management decisions. 
B) the market of takeover activity. 
C) the competition between management of a company to become the chief executive of a corporation. 
D) an auction whereby alternative management teams make a bid to control a company. 
A) a market in which alternative teams of managers compete for the right to control corporate assets and make top-level management decisions. 
B) the market of takeover activity. 
C) the competition between management of a company to become the chief executive of a corporation. 
D) an auction whereby alternative management teams make a bid to control a company.

Question 17

Shares of Bongo Ltd have an EPS of $2.00,and shares of Congo Ltd have an EPS of $1.00.If both companies have 100 shares and Bongo acquires Congo,what will be the EPS for the new combined entity if Bongo issues one share for every Congo share?

Accepted Answer

A) 3.00 
B) 1.00 
C) 2.00 
D) 1.50 
A) 3.00 
B) 1.00 
C) 2.00 
D) 1.50

Question 18

A likely reason for a larger,listed company to acquire a smaller,unlisted company is that:

Accepted Answer

A) the smaller company is undervalued. 
B) smaller companies are associated with greater tax benefits. 
C) the management of the smaller company may lack expertise in some areas. 
D) smaller companies tend to have excess liquidity. 
A) the smaller company is undervalued. 
B) smaller companies are associated with greater tax benefits. 
C) the management of the smaller company may lack expertise in some areas. 
D) smaller companies tend to have excess liquidity.

Question 19

Empirical evidence on takeovers reveals that:

Accepted Answer

A) takeovers do not benefit shareholders of target companies. 
B) actions by managers to prevent offers are most likely to be harmful to shareholders. 
C) takeover gains result from the creation of monopoly power. 
D) acquiring company shareholders earn significant losses. 
A) takeovers do not benefit shareholders of target companies. 
B) actions by managers to prevent offers are most likely to be harmful to shareholders. 
C) takeover gains result from the creation of monopoly power. 
D) acquiring company shareholders earn significant losses.

Question 20

A creeping takeover allows the acquisition of no more than 6 per cent of a target company's shares every six months,provided that the threshold level of 19 per cent has been maintained for at least six months.

Accepted Answer

A) True 
 B)False

Exam 19: Analysis of Takeovers

Which of the following does not influence the degree of competition in takeovers?

A leveraged buyout occurs where:

A possible reason for little effect on the wealth of acquiring-company shareholders in reaction to a takeover announcement even though a takeover might be profitable is:

A ________ is a strategic move by a company to make themselves less attractive to potential acquirers.

Takeover activity is regulated by Chapter 6 of the Corporations Act 2001,which seeks to ensure that:

Which of the following would shareholders regard as being an unacceptable reason for a takeover?

Conglomerate takeover can be best defined as a takeover of:

A likely shortcoming in valuing a target based on deducting total liabilities from total assets is:

Which of the following takeovers are most likely to be motivated by management inefficiency?

Which of the following statements is false?

Which section of the Competition and Consumer Act 2010 prohibits a company from acquiring the shares or assets of another company where the acquisition is likely to result in a substantial lessening of competition in a market?

A positive argument for 'spin offs' is:

Which of the following statements is not a conclusion drawn by Jensen (1988)based on US evidence?

Cost reductions are the primary purpose that drives most conglomerate takeovers.

An acquiring firm cannot use its own shares as consideration in a market takeover bid.

The market for corporate control can be defined as:

Shares of Bongo Ltd have an EPS of $2.00,and shares of Congo Ltd have an EPS of $1.00.If both companies have 100 shares and Bongo acquires Congo,what will be the EPS for the new combined entity if Bongo issues one share for every Congo share?

A likely reason for a larger,listed company to acquire a smaller,unlisted company is that:

Empirical evidence on takeovers reveals that:

A creeping takeover allows the acquisition of no more than 6 per cent of a target company's shares every six months,provided that the threshold level of 19 per cent has been maintained for at least six months.

Introduction

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

The Capital Market

Sources of Finance: Equity

Sources of Finance: Debt

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Futures Contracts

Options and Contingent Claims

International Financial Management

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

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