Question 1

The potential of a tax loss carry-forward has no effect when considering the acquisition of a company.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Leveraged buyout occur to firms that have an unusually large cash/total assets position.

Accepted Answer

A) True 
 B)False

Question 4

The price that a company has to pay to purchase another firm is typically:

Accepted Answer

A)  the book value. 
B)  the market value. 
C)  some premium over current market value. 
D)  some discount of current market value. 
A)  the book value. 
B)  the market value. 
C)  some premium over current market value. 
D)  some discount of current market value.

Question 5

Leveraged buyouts are restricted to "outside" tender offers.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 8

A tax loss carry-forward of $1,000,000 for company ZZZ is not usually worth $1,000,000 in present value to a firm that might acquire company ZZZ.

Accepted Answer

A) True 
 B)False

Question 9

United States style mergers rarely happen in Canada.

Accepted Answer

A) True 
 B)False

Question 10

The earnings per share impact of a merger are influenced by relative price-earnings ratios and the terms of exchange.

Accepted Answer

A) True 
 B)False

Question 11

Synergy is said to take place when the whole is less than the sum of the parts.

Accepted Answer

A) True 
 B)False

Question 12

Mergers often improve the financing flexibility that a larger company has available.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Which of the following is a tender offer that utilizes borrowed funds and the acquired firm's assets as collateral?

Accepted Answer

A)  Unfriendly take-over 
B)  Divestiture 
C)  Repurchase 
D)  Leveraged buyout 
A)  Unfriendly take-over 
B)  Divestiture 
C)  Repurchase 
D)  Leveraged buyout

Question 15

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 16

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 17

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 18

In the event that Active Corp.,which has a low P/E ratio,acquires Basic Corp.,which has a higher P/E ratio,we could be assured one of the following would occur.

Accepted Answer

A)  Active Corp.will have an immediate increase in EPS. 
B)  Active Corp.will have an immediate decrease in EPS. 
C)  Active Corp.will have an immediate increase in the growth rate of EPS. 
D)  Active Corp.will have an immediate decrease in P/E. 
A)  Active Corp.will have an immediate increase in EPS. 
B)  Active Corp.will have an immediate decrease in EPS. 
C)  Active Corp.will have an immediate increase in the growth rate of EPS. 
D)  Active Corp.will have an immediate decrease in P/E.

Question 19

The write off of goodwill is a tax deductible expense.

Accepted Answer

A) True 
 B)False

Question 20

The advantage of a holding company:

Accepted Answer

A)  is that it seems to afford opportunities for leverage. 
B)  is that it always prevents foreign acquisition. 
C)  is the avoidance of competition laws. 
D)  is that it magnifies poor returns. 
A)  is that it seems to afford opportunities for leverage. 
B)  is that it always prevents foreign acquisition. 
C)  is the avoidance of competition laws. 
D)  is that it magnifies poor returns.

The potential of a tax loss carry-forward has no effect when considering the acquisition of a company.

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.

Leveraged buyout occur to firms that have an unusually large cash/total assets position.

The price that a company has to pay to purchase another firm is typically:

Leveraged buyouts are restricted to "outside" tender offers.

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

A tax loss carry-forward of $1,000,000 for company ZZZ is not usually worth $1,000,000 in present value to a firm that might acquire company ZZZ.

United States style mergers rarely happen in Canada.

The earnings per share impact of a merger are influenced by relative price-earnings ratios and the terms of exchange.

Synergy is said to take place when the whole is less than the sum of the parts.

Mergers often improve the financing flexibility that a larger company has available.

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.

Which of the following is a tender offer that utilizes borrowed funds and the acquired firm's assets as collateral?

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

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

Which of the following firms would be a takeover candidate?

In the event that Active Corp.,which has a low P/E ratio,acquires Basic Corp.,which has a higher P/E ratio,we could be assured one of the following would occur.

The write off of goodwill is a tax deductible expense.

The advantage of a holding company:

The Goals and Activities 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 Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants and Derivatives

International Financial Management

Filters

Exam 20: External Growth Through Mergers

The potential of a tax loss carry-forward has no effect when considering the acquisition of a company.

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.

Leveraged buyout occur to firms that have an unusually large cash/total assets position.

The price that a company has to pay to purchase another firm is typically:

Leveraged buyouts are restricted to "outside" tender offers.

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

A tax loss carry-forward of $1,000,000 for company ZZZ is not usually worth $1,000,000 in present value to a firm that might acquire company ZZZ.

United States style mergers rarely happen in Canada.

The earnings per share impact of a merger are influenced by relative price-earnings ratios and the terms of exchange.

Synergy is said to take place when the whole is less than the sum of the parts.

Mergers often improve the financing flexibility that a larger company has available.

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.

Which of the following is a tender offer that utilizes borrowed funds and the acquired firm's assets as collateral?

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

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

Which of the following firms would be a takeover candidate?

In the event that Active Corp.,which has a low P/E ratio,acquires Basic Corp.,which has a higher P/E ratio,we could be assured one of the following would occur.

The write off of goodwill is a tax deductible expense.

The advantage of a holding company:

The Goals and Activities 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 Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants and Derivatives

International Financial Management

Filters