Chat with AIExam 22: Mergers and Acquisitions
Exam 1: Corporate Finance and the Financial Manager86 Questions
Exam 2: Introduction to Financial Statement Analysis108 Questions
Exam 3: Time Value of Money: an Introduction112 Questions
Exam 4: Time Value of Money: Valuing Cash Flow Streams67 Questions
Exam 5: Interest Rates110 Questions
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Exam 7: Stock Valuation64 Questions
Exam 8: Investment Decision Rules122 Questions
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Exam 11: Risk and Return in Capital Markets110 Questions
Exam 12: Systematic Risk and the Equity Risk Premium104 Questions
Exam 13: The Cost of Capital110 Questions
Exam 14: Raising Equity Capital107 Questions
Exam 15: Debt Financing101 Questions
Exam 16: Capital Structure109 Questions
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Exam 18: Financial Modeling and Pro Forma Analysis95 Questions
Exam 19: Working Capital Management108 Questions
Exam 20: Short-Term Financial Planning110 Questions
Exam 21: Option Applications and Corporate Finance102 Questions
Exam 22: Mergers and Acquisitions47 Questions
Exam 23: International Corporate Finance108 Questions
Exam 24: Leasing46 Questions
Exam 25: Insurance and Risk Management38 Questions
Exam 26: Corporate Governance45 Questions
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A situation where every director serves a three-year term and the terms are staggered so that only one-third of the directors are up for election each year is called a ________.
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(Multiple Choice)
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(87) Correct Answer:
Verified
VerifiedB
Use the information for the question(s)below.
Martin Manufacturing has earnings per share (EPS)of $3.00, 5 million shares outstanding, and a share price of $32. Martin is considering buying Luther Industries, which has earnings per share of $2.50, 2 million shares outstanding, and a share price of $20. Martin will pay for Luther by issuing new shares. There are no expected synergies from the transaction.
-If Martin pays no premium to acquire Luther, what will the earnings per share be after the merger?
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(Essay)
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(90) Correct Answer:Verified
VerifiedFirst, since Martin is paying for the merger with stock, the number of shares that Martin must issue:
= ($2.50 × 2 million)/ $32 million = 1.25 million
So the total number of shares in the new merged firm
= 5 million (existing Martin shares)+ 1.25 million new shares = 6.25 million shares.
Total earnings for the merged firm = Earnings from Martin + Earnings from Luther.
Earnings from Martin = EPS × shares outstanding = $3.00 × 5 million = $15 million
Earnings from Luther = EPS × shares outstanding = $2.50 × 2 million = $5 million
Total earnings = $15 + $5 = $20 million
EPS of merged firm = $20 million / 6.25 million = $3.20
Consider the following equation: 
< 
The term x in this equation refers to ________.
< The term x in this equation refers to ________.Free
(Multiple Choice)
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(82) Correct Answer:Verified
VerifiedC
Consider two firms, Thither and Yon. Both companies will either make $30 million or lose $10 million every year with equal probability. The companies' profits are perfectly negatively correlated. What are the expected after-tax profits of Thither in any year, assuming a corporate tax rate of 35% and no tax loss carry back or carry forward?
(Multiple Choice)
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(72) Consider two firms, Bob Company and Cat Enterprises, both with earnings of $10 per share and 5 million shares outstanding. Cat is a mature company with few growth opportunities and a stock price of $25 per share. Bob is a new firm with much higher growth opportunities and a stock price of $40 per share. Assume Bob acquires Cat using its own stock and the takeover adds no value. In a perfect capital market, how many shares must Bob offer Cat's shareholders in exchange for their shares?
(Multiple Choice)
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(78) On average, when a bid is announced, the stock price of the target drops.
(True/False)
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(89) The justification for the benefits of diversification from mergers include all of the following EXCEPT ________.
(Multiple Choice)
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(63) When a hostile takeover appears to be inevitable, a target company will sometimes look for another, friendlier company to acquire it called a ________.
(Multiple Choice)
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(75) Consider a case in which existing shareholders do not have to invest time and effort, but still participate in the gains from a takeover, while the bidder who puts in the time and effort is forced to give up substantial profits. This situation is called ________.
(Multiple Choice)
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(83) Mayo Corporation is currently trading at $30 per share. There are 10 million shares outstanding, and the company has no debt. You believe that the value of the company would increase by 50% if the management were replaced. How much would you gain from acquiring 50% of Mayo's shares by borrowing, attaching the debt to the company and replacing the management?
(Multiple Choice)
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(80) The fact that a large company can enjoy savings from producing goods in high volume that are not available to a small company is called ________.
(Multiple Choice)
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(83) Which of the following statements regarding mergers and taxes is FALSE?
(Multiple Choice)
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(81) The merger of two companies in the same industry that make products required at different stages of the production cycle is called ________.
(Multiple Choice)
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(82) Savings that come from combining the marketing and distribution of different types of related products are called ________.
(Multiple Choice)
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(78) A rights offering that gives existing target shareholders the right to buy shares in either the target or an acquirer at a deeply discounted price once certain conditions are met is called a ________.
(Multiple Choice)
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(95) Consider the following equation: 
< 
The term S in this equation refers to ________.
< The term S in this equation refers to ________. (Multiple Choice)
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