Question 1

Which one of these should be the primary appeal of unused debt capacity to a bidder firm?

Accepted Answer

A) Ability to borrow additional funds to increase management bonuses 
B) Source of funding for negative net present value projects 
C) Increased funding for the payment of unsustainable dividends 
D) Tax savings resulting from increased interest expense on additional debt 
E) Debt funding for a golden parachute 
A) Ability to borrow additional funds to increase management bonuses 
B) Source of funding for negative net present value projects 
C) Increased funding for the payment of unsustainable dividends 
D) Tax savings resulting from increased interest expense on additional debt 
E) Debt funding for a golden parachute

Question 2

Which term is applied to the situation where a bidding firm agrees to a limitation on its holdings in the target firm?

Accepted Answer

A) Shark repellent 
B) Countertender offer 
C) Standstill agreement 
D) Poison pill annulment 
E) Fair price provision 
A) Shark repellent 
B) Countertender offer 
C) Standstill agreement 
D) Poison pill annulment 
E) Fair price provision

Question 3

The purchase _______ best fits the definition of a vertical acquisition.

Accepted Answer

A) of a men's clothing store by a women's clothing company 
B) of a vacation resort by a steel manufacturer 
C) of a coal mine by an electric utility company 
D) by a restaurant of its main competitor 
E) of an airline by a major retail chain 
A) of a men's clothing store by a women's clothing company 
B) of a vacation resort by a steel manufacturer 
C) of a coal mine by an electric utility company 
D) by a restaurant of its main competitor 
E) of an airline by a major retail chain

Question 4

Wilson's has 5,000 shares of stock outstanding at a market price per share of $16.Albertsen's has 20,000 shares outstanding that sell for $25 a share.By merging,$15,000 of synergy can be created.Albertsen's is acquiring Wilson's for $85,000 worth of Albertsen stock.What is the post-merger value per share?

Accepted Answer

A) $25.43 
B) $25.00 
C) $25.75 
D) $24.25 
E) $25.12 
A) $25.43 
B) $25.00 
C) $25.75 
D) $24.25 
E) $25.12

Question 5

Explain the pros and cons of a cash acquisition over a stock acquisition.

Accepted Answer

A cash acquisition does not change the c

Question 6

As it applies to an acquisition,the term goodwill is defined as the difference at the time of acquisition between the:

Accepted Answer

A) purchase price and the book value of a target firm. 
B) purchase price and the estimated fair market value of the net assets acquired. 
C) fair market value of the net assets acquired and the target firm's equity. 
D) market value and the book value of a target firm. 
E) market value and book value of the target firm's total assets. 
A) purchase price and the book value of a target firm. 
B) purchase price and the estimated fair market value of the net assets acquired. 
C) fair market value of the net assets acquired and the target firm's equity. 
D) market value and the book value of a target firm. 
E) market value and book value of the target firm's total assets.

Question 7

Tropical Foods just paid $245,000 cash to acquire Southern Veggies.Prior to the acquisition Southern Veggies had a firm value of $228,000 and Tropical Foods was valued at $980,000.The acquisition created $46,000 of synergy from cost efficiencies.What is the value of Southern Veggies to Tropical Foods?

Accepted Answer

A) $245,000 
B) $291,000 
C) $46,000 
D) $29,000 
E) $274,000 
A) $245,000 
B) $291,000 
C) $46,000 
D) $29,000 
E) $274,000

Question 8

Carlisle's Market has a market value of $429,000 while Food World's market value is $191,000.Carlisle's just acquired Food World for $200,000 cash.What is the net present value of the acquisition if the merger creates $28,000 of synergy from cost efficiencies?

Accepted Answer

A) $19,000 
B) $17,000 
C) -$9,000 
D) $37,000 
E) $219,000 
A) $19,000 
B) $17,000 
C) -$9,000 
D) $37,000 
E) $219,000

Question 9

Which one of these statements is true?

Accepted Answer

A) The NPV of a merger can only be shared with the target firm's shareholders if the merger is financed with cash. 
B) A cash acquisition affects the control of a bidder firm. 
C) An acquisition financed with shares of stock is generally a tax-free transaction for all involved shareholders. 
D) A cash acquisition causes the shareholders of the target firm to share in any merger losses. 
E) A cash acquisition is less expensive than a stock acquisition to the shareholders of the acquiring firm when a merger produces a negative NPV. 
A) The NPV of a merger can only be shared with the target firm's shareholders if the merger is financed with cash. 
B) A cash acquisition affects the control of a bidder firm. 
C) An acquisition financed with shares of stock is generally a tax-free transaction for all involved shareholders. 
D) A cash acquisition causes the shareholders of the target firm to share in any merger losses. 
E) A cash acquisition is less expensive than a stock acquisition to the shareholders of the acquiring firm when a merger produces a negative NPV.

Question 10

Which one of these statements is true?

Accepted Answer

A) One disadvantage of a merger is that it requires the approval of both the target and bidder firm's shareholders. 
B) Normally,the target firm's management is very cooperative during the merger process. 
C) A consolidation is a complete absorption of a target firm by a bidder firm,which retains its name and identity. 
D) An entirely new firm is created when any type of merger or consolidation occurs. 
E) Mergers are legally complex and expensive. 
A) One disadvantage of a merger is that it requires the approval of both the target and bidder firm's shareholders. 
B) Normally,the target firm's management is very cooperative during the merger process. 
C) A consolidation is a complete absorption of a target firm by a bidder firm,which retains its name and identity. 
D) An entirely new firm is created when any type of merger or consolidation occurs. 
E) Mergers are legally complex and expensive.

Question 11

New Tech has a market value of $384,000.Emerson Electrics has 40,000 shares of stock outstanding at a price per share of $39.Emerson Electrics is acquiring New Tech in exchange for 10,000 shares of Emerson Electrics stock.The merger is expected to create $28,000 of synergy.What is the merger net present value?

Accepted Answer

A) -$81,000 
B) -$10,400 
C) $22,400 
D) $17,600 
E) $46,400 
A) -$81,000 
B) -$10,400 
C) $22,400 
D) $17,600 
E) $46,400

Which one of these should be the primary appeal of unused debt capacity to a bidder firm?

Which term is applied to the situation where a bidding firm agrees to a limitation on its holdings in the target firm?

The purchase _______ best fits the definition of a vertical acquisition.

Explain the pros and cons of a cash acquisition over a stock acquisition.

As it applies to an acquisition,the term goodwill is defined as the difference at the time of acquisition between the:

Carlisle's Market has a market value of $429,000 while Food World's market value is $191,000.Carlisle's just acquired Food World for $200,000 cash.What is the net present value of the acquisition if the merger creates $28,000 of synergy from cost efficiencies?

Which one of these statements is true?

Which one of these statements is true?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return Lessons From Market History

Return and Risk: the Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

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Exam 21: Mergers and Acquisitions Web Only

Which one of these should be the primary appeal of unused debt capacity to a bidder firm?

Which term is applied to the situation where a bidding firm agrees to a limitation on its holdings in the target firm?

The purchase _______ best fits the definition of a vertical acquisition.

Explain the pros and cons of a cash acquisition over a stock acquisition.

As it applies to an acquisition,the term goodwill is defined as the difference at the time of acquisition between the:

Carlisle's Market has a market value of $429,000 while Food World's market value is $191,000.Carlisle's just acquired Food World for $200,000 cash.What is the net present value of the acquisition if the merger creates $28,000 of synergy from cost efficiencies?

Which one of these statements is true?

Which one of these statements is true?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return Lessons From Market History

Return and Risk: the Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

International Corporate Finance

Filters