Question 1

When analyzing a going concern acquisition the financial manager should consider:

Accepted Answer

A)  the net present value of the firm post-acquisition. 
B)  the net book value of the firm post-acquisition. 
C)  the net present value of the firm pre-acquisition. 
D)  the net book value of the firm pre-acquisition. 
A)  the net present value of the firm post-acquisition. 
B)  the net book value of the firm post-acquisition. 
C)  the net present value of the firm pre-acquisition. 
D)  the net book value of the firm pre-acquisition.

Question 2

Laura's Design Corporation has $400,000 in tax loss carry-forwards. Vandenbosch Investment Consulting, a firm in the 40% tax bracket, would be willing to pay (on a non-discounted basis) the sum of ______________ for the carry-forward alone.

Accepted Answer

A)  $240,000 
B)  $160,000 
C)  $400,000 
D)  $100,000 
A)  $240,000 
B)  $160,000 
C)  $400,000 
D)  $100,000

Question 3

The term "Reverse Leveraged Buyout" refers to a company that had previously gone from a public company to a private company and sells stock to the public years later.

Accepted Answer

A) True 
 B)False

Question 4

Discuss briefly the diversification benefits and pitfalls of a merger.

Accepted Answer

Diversification by combining entities wi

Question 5

When a tobacco firm merges with a steel company, it would be called:

Accepted Answer

A)  a horizontal merger. 
B)  a vertical merger. 
C)  a conglomerate merger. 
D)  a consolidation. 
A)  a horizontal merger. 
B)  a vertical merger. 
C)  a conglomerate merger. 
D)  a consolidation.

Question 6

The Celluloid Collar Corporation has $360,000 in tax loss carry-forwards. The Bowstring Shirt Company, a firm in the 30% tax bracket, would be willing to pay (on a non-discounted basis) the sum of ______________ for the carry-forward alone.

Accepted Answer

A)  $108,000 
B)  $252,000 
C)  $350,000 
D)  $200,000 
A)  $108,000 
B)  $252,000 
C)  $350,000 
D)  $200,000

Question 7

Dilution in earnings per share occurs when a company with:

Accepted Answer

A)  a high P/E ratio buys a company with a low P/E ratio. 
B)  a low P/E ratio buys a company with a high P/E ratio. 
C)  a high growth rate in earnings per share buys a company with a low growth rate in earnings per share. 
D)  a low growth rate in earnings per share buys a company with a high growth rate in earnings per share. 
A)  a high P/E ratio buys a company with a low P/E ratio. 
B)  a low P/E ratio buys a company with a high P/E ratio. 
C)  a high growth rate in earnings per share buys a company with a low growth rate in earnings per share. 
D)  a low growth rate in earnings per share buys a company with a high growth rate in earnings per share.

Question 8

Which of the following statements is true of mergers and amalgamations in Canada?

Accepted Answer

A)  The terms "merger" and "amalgamation" have no legal definition. 
B)  The term "merger" is legally defined and the term "amalgamation" is not. 
C)  The term "amalgamation" is legally defined and the term "merger" is not. 
D)  Amalgamation means one company purchases the shares of another and merger means a statutory combination under one of the Provincial Corporations Act, the Canada Corporations Act, or the Canada Business Corporations Act. 
A)  The terms "merger" and "amalgamation" have no legal definition. 
B)  The term "merger" is legally defined and the term "amalgamation" is not. 
C)  The term "amalgamation" is legally defined and the term "merger" is not. 
D)  Amalgamation means one company purchases the shares of another and merger means a statutory combination under one of the Provincial Corporations Act, the Canada Corporations Act, or the Canada Business Corporations Act.

Question 9

By using cash instead of stock, a company may diminish the perceived dilutive effects of a merger.

Accepted Answer

A) True 
 B)False

Question 10

One of the primary motives of merger activity is that acquiring companies find it less expensive to buy assets than to build.

Accepted Answer

A) True 
 B)False

Question 11

List and describe financial motives for mergers.

Accepted Answer

1 Portfolio Effect: A merger allo

Question 12

Which of the following is not a form of compensation that selling shareholders could receive?

Accepted Answer

A)  Stock 
B)  Cash 
C)  Stock options 
D)  Fixed income securities 
A)  Stock 
B)  Cash 
C)  Stock options 
D)  Fixed income securities

Question 13

-Company A has a growth rate in EPS of 14%. Company B's growth rate in EPS is 10%. What is the post-merger growth rate assuming the facts as previously stated? (Assume no Synergy.)

Accepted Answer

A)  13.20% 
B)  10.88% 
C)  12.00% 
D)  12.67% 
A)  13.20% 
B)  10.88% 
C)  12.00% 
D)  12.67%

Question 14

To avoid an unfriendly takeover, management may institute one or more of several takeover defences. List and explain in detail these defences.

Accepted Answer

These defensive tactics are sometimes re

Question 15

An example of a horizontal merger would be:

Accepted Answer

A)  Husky Oil and Hudson Bay. 
B)  McDonalds and Pillsbury. 
C)  Pepsi and Frito Lay. 
D)  Coca Cola and Canada Dry. 
A)  Husky Oil and Hudson Bay. 
B)  McDonalds and Pillsbury. 
C)  Pepsi and Frito Lay. 
D)  Coca Cola and Canada Dry.

Question 16

Company A buys Company B for $3,500,000. Company A had a pre-merger net worth of $8,000,000; Company B's net worth was $2,000,000. The transaction was accounted for as a pooling of interests. Company A wants to write off any available goodwill as slowly as allowable.
-How much would Company A write off each year?

Accepted Answer

A)  $112,500 
B)  $37,500 
C)  $150,000 
D)  $0 
A)  $112,500 
B)  $37,500 
C)  $150,000 
D)  $0

Question 17

Too much diversification has led some companies to sell off companies previously acquired during the merger boom.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following firms would be a takeover candidate?

Accepted Answer

A)  A firm with strong market position, high earnings and low current assets. 
B)  A firm with strong market position, low earnings and low cash balances. 
C)  A firm with strong market position, low earnings and high cash balances. 
D)  A firm with high non-current assets, high earnings and low current assets. 
A)  A firm with strong market position, high earnings and low current assets. 
B)  A firm with strong market position, low earnings and low cash balances. 
C)  A firm with strong market position, low earnings and high cash balances. 
D)  A firm with high non-current assets, high earnings and low current assets.

Question 19

The write off of goodwill is a tax deductible expense.

Accepted Answer

A) True 
 B)False

Question 20

Mergers after the financial crisis of 2008 were driven by which of the following factors?

Accepted Answer

A)  High interest rates 
B)  Large cash positions 
C)  Less global competition 
D)  High price earnings ratios 
A)  High interest rates 
B)  Large cash positions 
C)  Less global competition 
D)  High price earnings ratios

When analyzing a going concern acquisition the financial manager should consider:

Laura's Design Corporation has $400,000 in tax loss carry-forwards. Vandenbosch Investment Consulting, a firm in the 40% tax bracket, would be willing to pay (on a non-discounted basis) the sum of ______________ for the carry-forward alone.

The term "Reverse Leveraged Buyout" refers to a company that had previously gone from a public company to a private company and sells stock to the public years later.

Discuss briefly the diversification benefits and pitfalls of a merger.

When a tobacco firm merges with a steel company, it would be called:

The Celluloid Collar Corporation has $360,000 in tax loss carry-forwards. The Bowstring Shirt Company, a firm in the 30% tax bracket, would be willing to pay (on a non-discounted basis) the sum of ______________ for the carry-forward alone.

Dilution in earnings per share occurs when a company with:

Which of the following statements is true of mergers and amalgamations in Canada?

By using cash instead of stock, a company may diminish the perceived dilutive effects of a merger.

One of the primary motives of merger activity is that acquiring companies find it less expensive to buy assets than to build.

List and describe financial motives for mergers.

Which of the following is not a form of compensation that selling shareholders could receive?

-Company A has a growth rate in EPS of 14%. Company B's growth rate in EPS is 10%. What is the post-merger growth rate assuming the facts as previously stated? (Assume no Synergy.)

To avoid an unfriendly takeover, management may institute one or more of several takeover defences. List and explain in detail these defences.

An example of a horizontal merger would be:

Too much diversification has led some companies to sell off companies previously acquired during the merger boom.

Which of the following firms would be a takeover candidate?

The write off of goodwill is a tax deductible expense.

Mergers after the financial crisis of 2008 were driven by which of the following factors?

The Goals and Functions of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Underwriting

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Derivative Securities

International Financial Management

Filters

Exam 20: External Growth Through Mergers

When analyzing a going concern acquisition the financial manager should consider:

Laura's Design Corporation has $400,000 in tax loss carry-forwards. Vandenbosch Investment Consulting, a firm in the 40% tax bracket, would be willing to pay (on a non-discounted basis) the sum of ______________ for the carry-forward alone.

The term "Reverse Leveraged Buyout" refers to a company that had previously gone from a public company to a private company and sells stock to the public years later.

Discuss briefly the diversification benefits and pitfalls of a merger.

When a tobacco firm merges with a steel company, it would be called:

The Celluloid Collar Corporation has $360,000 in tax loss carry-forwards. The Bowstring Shirt Company, a firm in the 30% tax bracket, would be willing to pay (on a non-discounted basis) the sum of ______________ for the carry-forward alone.

Dilution in earnings per share occurs when a company with:

Which of the following statements is true of mergers and amalgamations in Canada?

By using cash instead of stock, a company may diminish the perceived dilutive effects of a merger.

One of the primary motives of merger activity is that acquiring companies find it less expensive to buy assets than to build.

List and describe financial motives for mergers.

Which of the following is not a form of compensation that selling shareholders could receive?

-Company A has a growth rate in EPS of 14%. Company B's growth rate in EPS is 10%. What is the post-merger growth rate assuming the facts as previously stated? (Assume no Synergy.)

To avoid an unfriendly takeover, management may institute one or more of several takeover defences. List and explain in detail these defences.

An example of a horizontal merger would be:

Too much diversification has led some companies to sell off companies previously acquired during the merger boom.

Which of the following firms would be a takeover candidate?

The write off of goodwill is a tax deductible expense.

Mergers after the financial crisis of 2008 were driven by which of the following factors?

The Goals and Functions of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Underwriting

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Derivative Securities

International Financial Management

Filters