Question 1

If Georgia Pacific (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)  spin-off by the national homebuilding firm. 
A)  horizontal merger. 
B)  vertical merger. 
C)  conglomerate merger. 
D)  spin-off by the national homebuilding firm.

Question 2

When one firm merges with another,the:

Accepted Answer

A)  boards of directors will merge also. 
B)  merger must be approved by 75% of the shareholders of the target firm. 
C)  assets will be merged but the liabilities will not. 
D)  target firm will cease to exist as a separate public company. 
A)  boards of directors will merge also. 
B)  merger must be approved by 75% of the shareholders of the target firm. 
C)  assets will be merged but the liabilities will not. 
D)  target firm will cease to exist as a separate public company.

Question 3

In a merger the acquiring firm buys only the debt of the target firm.

Accepted Answer

A) True 
 B)False

Question 4

A conglomerate merger is defined as the merger of two or more Fortune 500 companies.

Accepted Answer

A) True 
 B)False

Question 5

Vertical integration makes sense when two firms are highly dependent upon each other.

Accepted Answer

A) True 
 B)False

Question 6

The value of the target firm's bonds tend to decrease when a leveraged buyout is announced.

Accepted Answer

A) True 
 B)False

Question 7

By offering to buy shares directly from a target's shareholders,the acquiring firm can bypass the target firm's management altogether.

Accepted Answer

A) True 
 B)False

Question 8

Synergy is equal to the value of a combined firm minus the total value of the firms prior to merger.

Accepted Answer

A) True 
 B)False

Question 9

Contrary to logic,firms that enjoy complementary resources in the production process are rarely good candidates for merger.

Accepted Answer

A) True 
 B)False

Question 10

Firms A and B were each currently worth $50 million but generated a $20 million gain when merged.If the cost of the merger was $5 million,how much did firm A pay for firm B?

Accepted Answer

A)  $50 million 
B)  $55 million 
C)  $60 million 
D)  $65 million 
A)  $50 million 
B)  $55 million 
C)  $60 million 
D)  $65 million

Question 11

Which one of the following is false concerning a proposed merger of firms?

Accepted Answer

A)  The acquired firm will cease to exist. 
B)  Shareholders of the acquired firm may receive securities in the acquiring firm. 
C)  Mergers are sometimes combinations of equals. 
D)  Shareholder approval to merge is not required. 
A)  The acquired firm will cease to exist. 
B)  Shareholders of the acquired firm may receive securities in the acquiring firm. 
C)  Mergers are sometimes combinations of equals. 
D)  Shareholder approval to merge is not required.

Question 12

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 13

If the shareholders of an acquired firm capture all of the merger's gain,then the:

Accepted Answer

A)  cost of the merger is zero. 
B)  NPV of the merger is zero. 
C)  EPS will increase. 
D)  acquiring firm retains all merger benefits. 
A)  cost of the merger is zero. 
B)  NPV of the merger is zero. 
C)  EPS will increase. 
D)  acquiring firm retains all merger benefits.

Question 14

Only the U.S.has antitrust laws that can affect mergers and acquisitions.

Accepted Answer

A) True 
 B)False

Question 15

Tax inversion refers to the fact that mergers often result in extra capital gains taxes for shareholders.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Firm B's 1 million shares of stock currently sell for $12 each,but firm A is preparing a tender offer of $18 per share.Firm A estimates the NPV of the merger to be $5 million.What percentage of the merger gains will be captured by firm B's stockholders?

Accepted Answer

A)  33.33% 
B)  50.00% 
C)  66.67% 
D)  54.55% 
A)  33.33% 
B)  50.00% 
C)  66.67% 
D)  54.55%

Question 18

Firm A's shareholders will be better off with a stock offer than with a cash offer if A makes too generous of an offer for Firm B.

Accepted Answer

A) True 
 B)False

Question 19

If Microsoft were to acquire Dell Computer,it would 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 20

Other things equal,which one of the following groups of stakeholders often lose value as a result of an LBO?

Accepted Answer

A)  Selling stockholders 
B)  Buying stockholders 
C)  Pre-LBO bondholders 
D)  Investment bankers 
A)  Selling stockholders 
B)  Buying stockholders 
C)  Pre-LBO bondholders 
D)  Investment bankers

Exam 21: Mergers,Acquisitions,and Corporate Control

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

When one firm merges with another,the:

In a merger the acquiring firm buys only the debt of the target firm.

A conglomerate merger is defined as the merger of two or more Fortune 500 companies.

Vertical integration makes sense when two firms are highly dependent upon each other.

The value of the target firm's bonds tend to decrease when a leveraged buyout is announced.

By offering to buy shares directly from a target's shareholders,the acquiring firm can bypass the target firm's management altogether.

Synergy is equal to the value of a combined firm minus the total value of the firms prior to merger.

Contrary to logic,firms that enjoy complementary resources in the production process are rarely good candidates for merger.

Firms A and B were each currently worth $50 million but generated a $20 million gain when merged.If the cost of the merger was $5 million,how much did firm A pay for firm B?

Which one of the following is false concerning a proposed merger of firms?

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

If the shareholders of an acquired firm capture all of the merger's gain,then the:

Only the U.S.has antitrust laws that can affect mergers and acquisitions.

Tax inversion refers to the fact that mergers often result in extra capital gains taxes for shareholders.

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

Firm B's 1 million shares of stock currently sell for $12 each,but firm A is preparing a tender offer of $18 per share.Firm A estimates the NPV of the merger to be $5 million.What percentage of the merger gains will be captured by firm B's stockholders?

Firm A's shareholders will be better off with a stock offer than with a cash offer if A makes too generous of an offer for Firm B.

If Microsoft were to acquire Dell Computer,it would be an example of a:

Other things equal,which one of the following groups of stakeholders often lose value as a result of an LBO?

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

International Financial Management

Options

Risk Management

Filters