Question 1

The desire to expand management and marketing capabilities is a direct financial motive.

Accepted Answer

A) True 
 B)False

Question 2

After a merger has been announced, subsequent cancellation generally causes the potential acquiree's stock to decline in value.

Accepted Answer

A) True 
 B)False

Question 3

Synergy is

Accepted Answer

A)  the 2 + 2 = 3 effect. 
B)  the 2 + 2 = 4 effect. 
C)  the 2 + 2 = 5 effect. 
D)  always present in a merger. 
A)  the 2 + 2 = 3 effect. 
B)  the 2 + 2 = 4 effect. 
C)  the 2 + 2 = 5 effect. 
D)  always present in a merger.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Synergy is said to occur when the whole is

Accepted Answer

A)  equal to the sum of the parts. 
B)  less than the sum of the parts. 
C)  greater than the sum of the parts. 
D)  greater than or equal to the sum of the parts. 
A)  equal to the sum of the parts. 
B)  less than the sum of the parts. 
C)  greater than the sum of the parts. 
D)  greater than or equal to the sum of the parts.

Question 6

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

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 7

For mergers occurring after 2001, goodwill must be amortized over 40 years or less.

Accepted Answer

A) True 
 B)False

Question 8

Synergy is the greatest and most easily measured nonfinancial benefit in a merger.

Accepted Answer

A) True 
 B)False

Question 9

If the acquiring firm's P/E ratio is greater than the P/E of the acquired firm, the surviving firm will automatically get an increase in
E.P.S.

Accepted Answer

A) True 
 B)False

Question 10

The stock market reaction to divestitures may actually be positive if the divestiture is perceived to rid the company of an unprofitable business, or if it seems to sharpen the company's focus.

Accepted Answer

A) True 
 B)False

Question 11

The King Solomon Mining Company is contemplating a cash tender offer for the outstanding shares of Roanoke Coal Corporation. Roanoke Coal is expected to provide $175,000 in after-tax cash flow (after-tax income plus depreciation) each year for the next 20 years. In addition, Roanoke has a $400,000 tax loss carryforward which King Solomon Mining can use over the next two years ($200,000 per year).
If King Solomon Mining's corporate tax rate is 34% and its cost of capital is 12%, what is the cash price it should be willing to pay to acquire Roanoke based solely on it's cash-flow benefit over the next 20 years?

Accepted Answer

The answer of The King Solomon Mining Company is contemplating...

Question 12

One of the reasons that companies merge with other companies is to secure access to a competing industry.

Accepted Answer

A) True 
 B)False

Question 13

All of the following are methods of avoiding takeovers except:

Accepted Answer

A)  increasing the firm's cash level 
B)  moving corporate offices to advantageous states 
C)  staggering election of boards of directors 
D)  buying back shares 
A)  increasing the firm's cash level 
B)  moving corporate offices to advantageous states 
C)  staggering election of boards of directors 
D)  buying back shares

Question 14

Which of the following types of mergers is most likely to lead to diversification benefits?

Accepted Answer

A)  Horizontal merger 
B)  Vertical merger 
C)  Tax free exchange 
D)  Conglomerate 
A)  Horizontal merger 
B)  Vertical merger 
C)  Tax free exchange 
D)  Conglomerate

Question 15

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 16

A tax loss carryforward is a benefit to the acquired firm's shareholders.

Accepted Answer

A) True 
 B)False

Question 17

The Celluloid Collar Corporation has $210,000 in tax loss carryforwards. The Bowstring Shirt Company, a firm in the 30% tax bracket, would be willing to pay (on a nondiscounted basis) the sum of ______________ for the carryforward alone.

Accepted Answer

A)  $108,000 
B)  $52,000 
C)  $63,000 
D)  $1,200,000 
A)  $108,000 
B)  $52,000 
C)  $63,000 
D)  $1,200,000

Question 18

Match between columns
                        Premises: An unfriendly acquisition which is not initially negotiated with the management of the target firm.
2 + 2 = 5 effect.
A specialist in merger investments who attempts to capitalize on the difference between the value offered and the current market value of the acquisition candidate.
That part of a buy-out or exchange offer which represents a value over and above the market value of the acquired firm.
The acquisition of buyers and sellers of goods and services to the company.
The concept of maximizing the wealth of the stockholders.
Acquiring competitors which is often curbed by antitrust policy.
A type of takeover in which two offers are made: an initial offer to buy 51% of the stock at a price above current market value for a limited time only, after which a price below the current market value will be paid.

Accepted Answer

The Answer of tender offer-take over and vertical integration and is...

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

The desire to expand management and marketing capabilities is a direct financial motive.

After a merger has been announced, subsequent cancellation generally causes the potential acquiree's stock to decline in value.

Synergy is

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

Synergy is said to occur when the whole is

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

For mergers occurring after 2001, goodwill must be amortized over 40 years or less.

Synergy is the greatest and most easily measured nonfinancial benefit in a merger.

If the acquiring firm's P/E ratio is greater than the P/E of the acquired firm, the surviving firm will automatically get an increase in E.P.S.

The stock market reaction to divestitures may actually be positive if the divestiture is perceived to rid the company of an unprofitable business, or if it seems to sharpen the company's focus.

One of the reasons that companies merge with other companies is to secure access to a competing industry.

All of the following are methods of avoiding takeovers except:

Which of the following types of mergers is most likely to lead to diversification benefits?

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

A tax loss carryforward is a benefit to the acquired firm's shareholders.

The Celluloid Collar Corporation has $210,000 in tax loss carryforwards. The Bowstring Shirt Company, a firm in the 30% tax bracket, would be willing to pay (on a nondiscounted basis) the sum of ______________ for the carryforward alone.

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

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

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 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 desire to expand management and marketing capabilities is a direct financial motive.

After a merger has been announced, subsequent cancellation generally causes the potential acquiree's stock to decline in value.

Synergy is

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

Synergy is said to occur when the whole is

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

For mergers occurring after 2001, goodwill must be amortized over 40 years or less.

Synergy is the greatest and most easily measured nonfinancial benefit in a merger.

If the acquiring firm's P/E ratio is greater than the P/E of the acquired firm, the surviving firm will automatically get an increase in E.P.S.

The stock market reaction to divestitures may actually be positive if the divestiture is perceived to rid the company of an unprofitable business, or if it seems to sharpen the company's focus.

One of the reasons that companies merge with other companies is to secure access to a competing industry.

All of the following are methods of avoiding takeovers except:

Which of the following types of mergers is most likely to lead to diversification benefits?

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

A tax loss carryforward is a benefit to the acquired firm's shareholders.

The Celluloid Collar Corporation has $210,000 in tax loss carryforwards. The Bowstring Shirt Company, a firm in the 30% tax bracket, would be willing to pay (on a nondiscounted basis) the sum of ______________ for the carryforward alone.

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

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

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 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