Exam 26: Mergers and Acquisitions

Consider the following premerger information about Firm A and Firm B: Assume that Firm A acquires Firm B via an exchange of stock at a price of $25 for each share of B's stock.Both A and B have no debt outstanding.What will the earnings per share of Firm A be after the merger?

If an acquisition does not create value and the market is smart,then the:

The value of a target firm to the acquiring firm is equal to:

The Cycle Stop has 1,600 shares outstanding at a market price per share of $8.48.Kate's Wheels has 1,750 shares outstanding at a market price of $13 a share.Neither firm has any debt.Kate's Wheels is acquiring The Cycle Stop for $15,000 in cash.What is the merger premium per share?

In a merger the:

Dressler,Inc.,is planning on merging with Weston Foods.Dressler will pay Weston's shareholders the current value of its stock in shares of Dressler stock.Dressler's currently has 6,200 shares of stock outstanding at a market price of $30 a share.Weston's has 2,200 shares outstanding at a price of $25 a share.How many shares of stock will be outstanding in the merged firm?

Dixie and ten of her wealthy friends formed a group and borrowed the funds necessary to acquire 100 percent of the outstanding shares of Southern Fried Chicken.This transaction is known as a:

Melvin was attempting to gain control of Western Wood Products until he realized that the existing shareholders in the firm had the right to purchase additional shares at a below-market price given his hostile takeover attempt.Thus,Melvin decided to forego investing in this firm.What term applies to the tactic used by Western Wood Products to stave off this takeover attempt?

Assume the following balance sheets are stated at book value. Suppose the fair market value of Loaf's fixed assets is $7,200 versus the $3,300 book value shown.Meat pays $10,200 for Loaf and raises the needed funds through an issue of long-term debt.Assume the purchase method of accounting is used.The post-merger balance sheet of Meat Co.will have total debt of ______ and total equity of ______.

Which of the following statements correctly apply to a merger? I.The titles to individual assets of the acquired firm must be transferred into the acquiring firm's name. II.The merged firm will retain the use of the acquiring company's name. III.The acquiring firm does not have to seek approval for the merger from its shareholders. IV.The shareholders of the acquired company must approve the merger.

The incremental cash flows of a merger can relate to changes in which of the following? I.revenue II.capital requirements III.operating costs IV.income taxes

The current president and vice-presidents of Mountain Top Consulting have decided to form a private investment group with the sole purpose of purchasing Mountain Top Consulting.These individuals have found a lender who will lend them 85 percent of the purchase cost if they pledge their personal assets as collateral for the loan.The current officers agree to this arrangement,borrow the funds,and purchase Mountain Top Consulting.The purchase of this firm is referred to as a:

Firm A is acquiring Firm B for $75,000 in cash.Firm A has 4,500 shares of stock outstanding at a market value of $27 a share.Firm B has 2,500 shares of stock outstanding at a market price of $29 a share.Neither firm has any debt.The incremental value of the acquisition is $2,200.What is the price per share of Firm A's stock after the acquisition?

Troyer Markets and Deb's Grocery are all-equity firms.Troyer Markets has 2,400 shares outstanding at a market price of $14.80 a share.Deb's Grocery has 3,200 shares outstanding at a price of $28 a share.Deb's Grocery is acquiring Troyer Markets for $37,500 in cash.What is the merger premium per share?

For financial statement purposes,goodwill created by an acquisition:

The Sweet Shoppe and Candy Land are all-equity firms.The Sweet Shoppe has 500 shares outstanding at a market price of $96 a share.Candy Land has 2,700 shares outstanding at a price of $24 a share.The Sweet Shoppe is acquiring Candy Land for $62,000 in cash.The incremental value of the acquisition is $3,600.What is the net present value of acquiring Candy Land to The Sweet Shoppe?

The Cat Box acquired The Dog House.As part of this transaction,both firms ceased to exist in their prior form and combined to create an all-new entity,Animal World.Which one of the following terms best describes this transaction?

Firm A is being acquired by Firm B for $54,000 worth of Firm B stock.The incremental value of the acquisition is $5,600.Firm A has 2,400 shares of stock outstanding at a price of $19 a share.Firm B has 2,700 shares of stock outstanding at a price of $50 a share.What is the actual cost of the acquisition using company stock?

Defensive merger tactics are designed to thwart unwanted takeovers and mergers.Do such activities work to the advantage of shareholders all of the time? Are these types of activities ethical? Who do you think benefits the most from these activities?

Which one of the following statements is correct?