Question 1

Which of the following factors will influence the initial potential dilution of earnings per share?

Accepted Answer

A) Differential in P/E ratios 
B) Relative size of the two firms as measured by earnings 
C) Taxability of target earnings 
D) All of the above 
E) Both a and b 
A) Differential in P/E ratios 
B) Relative size of the two firms as measured by earnings 
C) Taxability of target earnings 
D) All of the above 
E) Both a and b E

Question 2

The discount rate used to discount future cash flows should:

Accepted Answer

A) Be equal to yield on long-term U.S.Treasuries 
B) Be 2% greater than yield on long-term U.S.Treasuries 
C) Incorporate a risk premium equal to perceived risks and volatility of future cash flow stream 
D) Usually will be 1% greater than yield on high-yield bonds 
A) Be equal to yield on long-term U.S.Treasuries 
B) Be 2% greater than yield on long-term U.S.Treasuries 
C) Incorporate a risk premium equal to perceived risks and volatility of future cash flow stream 
D) Usually will be 1% greater than yield on high-yield bonds C

Question 3

In Rau and Vermaelen's research, glamour firms have high book to market value ratios.

Accepted Answer

A) True 
 B)False  False

Question 4

Continuing value and exit value mean the same thing.

Accepted Answer

A) True 
 B)False

Question 5

When multiples are derived from an analysis of historical earnings, they are referred to as trailing multiples.

Accepted Answer

A) True 
 B)False

Question 6

Moeller, Schlingemann, and Stulz's research shows that during the period 1998-2001, acquiring firm shareholders gained a total of $240 billion!

Accepted Answer

A) True 
 B)False

Question 7

In thin markets float shares are not as plentiful.

Accepted Answer

A) True 
 B)False

Question 8

Research by Roach showed:

Accepted Answer

A) Merger premiums have risen over time 
B) Strategic mergers provide more synergistic benefits 
C) Strategic focus is not a determinant of merger premiums. 
D) All of these 
E) Both a and b 
A) Merger premiums have risen over time 
B) Strategic mergers provide more synergistic benefits 
C) Strategic focus is not a determinant of merger premiums. 
D) All of these 
E) Both a and b

Question 9

Which of the following is true:

Accepted Answer

A) FCF = EBITDA - CE - CWC + CTP 
B) FCF = EBITDA - CE - CWC - CTP 
C) FCF = EBITDA - CE + CWC + CTP 
D) None of these 
A) FCF = EBITDA - CE - CWC + CTP 
B) FCF = EBITDA - CE - CWC - CTP 
C) FCF = EBITDA - CE + CWC + CTP 
D) None of these

Question 10

Which of the following are desirable characteristics of targets?

Accepted Answer

A) Rapidly growing cash flows and earnings 
B) Low P/E ratios 
C) Market value less than book value 
D) All of the above
True or False 
A) Rapidly growing cash flows and earnings 
B) Low P/E ratios 
C) Market value less than book value 
D) All of the above
True or False

Question 11

In bear markets, control premiums (relative to current market prices)) may rise.

Accepted Answer

A) True 
 B)False

Question 12

Research shows:

Accepted Answer

A) Target shareholders earn positive returns from merger agreements 
B) Target shareholders may earn even higher significant positive returns from tender offers than friendly mergers 
C) Target bondholders and preferred stockholders gain from takeovers 
D) All of these 
E) Both a and b
F)Both b and c 
A) Target shareholders earn positive returns from merger agreements 
B) Target shareholders may earn even higher significant positive returns from tender offers than friendly mergers 
C) Target bondholders and preferred stockholders gain from takeovers 
D) All of these 
E) Both a and b
F)Both b and c

Question 13

Acquiring firm shareholders tend to earn zero or negative returns from mergers.

Accepted Answer

A) True 
 B)False

Question 14

A study by Varaiya showed the following about takeover premiums:

Accepted Answer

A) Significant support for the role of competitive forces in the auction process in determining premiums 
B) Significant role for antitakeover measures in determining premiums 
C) Mixed results for the role of anticipated benefits 
D) All of the above 
E) Both b and c 
A) Significant support for the role of competitive forces in the auction process in determining premiums 
B) Significant role for antitakeover measures in determining premiums 
C) Mixed results for the role of anticipated benefits 
D) All of the above 
E) Both b and c

Question 15

The net effect of arbitrage buying is to increase the price while also increasing the probability that the company will be taken over.

Accepted Answer

A) True 
 B)False

Question 16

For a company with positive debt:

Accepted Answer

A) Enterprise value is less then equity value 
B) Enterprise value equals equity value 
C) Enterprise value is more than equity value 
D) None of these 
A) Enterprise value is less then equity value 
B) Enterprise value equals equity value 
C) Enterprise value is more than equity value 
D) None of these

Question 17

Business valuation is as much of an art as it is a science.

Accepted Answer

A) True 
 B)False

Question 18

For the bidder to enjoy an increase in EPS following a series of acquisitions, and in effect, play the P/E game, the following must be true:

Accepted Answer

A) Post-deal P/E ratio must not decline 
B) Acquirer must pay continually lower premiums with each deal 
C) The bidder must make fewer deals over time 
D) None of the above 
A) Post-deal P/E ratio must not decline 
B) Acquirer must pay continually lower premiums with each deal 
C) The bidder must make fewer deals over time 
D) None of the above

Question 19

Research by Kaplan and Ruback found that:

Accepted Answer

A) Median estimates of the DCF were within 10% of the market values 
B) Comparable multiples yielded significantly higher values than DCF measures 
C) Comparable multiples yielded significantly lower values than DCF measures 
D) None of these 
A) Median estimates of the DCF were within 10% of the market values 
B) Comparable multiples yielded significantly higher values than DCF measures 
C) Comparable multiples yielded significantly lower values than DCF measures 
D) None of these

Question 20

For many years the concentrated holdings by large block holders made hostile takeovers in Europe more difficult to complete.

Accepted Answer

A) True 
 B)False

Which of the following factors will influence the initial potential dilution of earnings per share?

The discount rate used to discount future cash flows should:

In Rau and Vermaelen's research, glamour firms have high book to market value ratios.

Continuing value and exit value mean the same thing.

When multiples are derived from an analysis of historical earnings, they are referred to as trailing multiples.

Moeller, Schlingemann, and Stulz's research shows that during the period 1998-2001, acquiring firm shareholders gained a total of $240 billion!

In thin markets float shares are not as plentiful.

Research by Roach showed:

Which of the following is true:

Which of the following are desirable characteristics of targets?

In bear markets, control premiums (relative to current market prices)) may rise.

Research shows:

Acquiring firm shareholders tend to earn zero or negative returns from mergers.

A study by Varaiya showed the following about takeover premiums:

The net effect of arbitrage buying is to increase the price while also increasing the probability that the company will be taken over.

For a company with positive debt:

Business valuation is as much of an art as it is a science.

For the bidder to enjoy an increase in EPS following a series of acquisitions, and in effect, play the P/E game, the following must be true:

Research by Kaplan and Ruback found that:

For many years the concentrated holdings by large block holders made hostile takeovers in Europe more difficult to complete.

Introduction

History of Mergers

Legal Framework

Merger Strategy

Antitakeover Measures

Takeover Tactics

Hedge Funds As Activist Investors

Going-Private Transactions and Leveraged Buyouts

The Private Equity Market

The Junk Bond and the Leveraged Loan Market and Stapled Financing

Corporate Restructuring

Restructuring in Bankruptcy

Corporate Governance

Joint Ventures and Strategic Alliances

Tax Issues in Mergers & Acquisitions

Filters

Exam 15: Valuation

Which of the following factors will influence the initial potential dilution of earnings per share?

The discount rate used to discount future cash flows should:

In Rau and Vermaelen's research, glamour firms have high book to market value ratios.

Continuing value and exit value mean the same thing.

When multiples are derived from an analysis of historical earnings, they are referred to as trailing multiples.

Moeller, Schlingemann, and Stulz's research shows that during the period 1998-2001, acquiring firm shareholders gained a total of $240 billion!

In thin markets float shares are not as plentiful.

Research by Roach showed:

Which of the following is true:

Which of the following are desirable characteristics of targets?

In bear markets, control premiums (relative to current market prices)) may rise.

Research shows:

Acquiring firm shareholders tend to earn zero or negative returns from mergers.

A study by Varaiya showed the following about takeover premiums:

The net effect of arbitrage buying is to increase the price while also increasing the probability that the company will be taken over.

For a company with positive debt:

Business valuation is as much of an art as it is a science.

For the bidder to enjoy an increase in EPS following a series of acquisitions, and in effect, play the P/E game, the following must be true:

Research by Kaplan and Ruback found that:

For many years the concentrated holdings by large block holders made hostile takeovers in Europe more difficult to complete.

Introduction

History of Mergers

Legal Framework

Merger Strategy

Antitakeover Measures

Takeover Tactics

Hedge Funds As Activist Investors

Going-Private Transactions and Leveraged Buyouts

The Private Equity Market

The Junk Bond and the Leveraged Loan Market and Stapled Financing

Corporate Restructuring

Restructuring in Bankruptcy

Corporate Governance

Joint Ventures and Strategic Alliances

Tax Issues in Mergers & Acquisitions

Filters