Question 1

A poison pill protects the rights of shareholders.

Accepted Answer

A) True 
 B)False

Question 2

Briefly explain what is meant by economic gain from merger?

Accepted Answer

The answer of Briefly explain what is meant by economic...

Question 3

Antitrust law can be enforced by the federal government by:
I. a civil suit brought by the Justice Department
II. a proceedings initiated by the Federal Trade Commission (FTC)
III. a proceedings initiated by the Securities and Exchange Commission (SEC)

Accepted Answer

A)  I only 
B)  I and II only 
C)  I, II and III 
D)  II only

Question 4

In the purchase method of merger accounting a new asset category called goodwill is created.

Accepted Answer

A) True 
 B)False

Question 5

An example of a shark-repellent charter amendment is:
I. Supermajority
II. Waiting period
III. Restricted voting rights
IV. Staggered board

Accepted Answer

A)  I only 
B)  II only 
C)  I and II only 
D)  I, II, III, and IV

Question 6

A dissident group solicits votes in an attempt to replace existing management. This is called a:

Accepted Answer

A)  Proxy fight 
B)  Shareholder derivative action 
C)  Tender offer 
D)  Management freeze-out

Question 7

Accounting changes by the Financial Accounting Standards Board (FASB) in the US:

Accepted Answer

A)  eliminated the "purchase method," allowing only the "pooling-of-interests" method for mergers and acquisitions 
B)  eliminated the "pooling-of-interests" method, allowing only the "purchase method" for mergers and acquisitions 
C)  allow for both the "purchase method" and the "pooling-of-interests" method for mergers and acquisitions 
D)  none of the above

Question 8

As a defensive maneuver, a firm issues deep-discount bonds that are redeemable at par in the event of an unfriendly takeover. These bonds are an example of:

Accepted Answer

A)  Greenmail 
B)  A "scorched earth" policy 
C)  Crown jewels 
D)  A poison put

Question 9

Companies A and B are valued as follows:  Company A now acquires B by offering one (new) share of A for every two shares of B (that is, after the merger, there are 2500 shares of A outstanding). If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger?

Accepted Answer

A)  7.5 
B)  8.3 
C)  10.0 
D)  5.0

Question 10

A poison pill defense is implemented by

Accepted Answer

A)  Giving stock away 
B)  Selling firm assets 
C)  Issuing rights at a cheap price 
D)  Adding seats to the board of directors

Question 11

Given the following data:  If Firm A offers 250,000 shares for B's shareholders, calculate the true cost of merger:

Accepted Answer

A)  $2 million 
B)  $3 million 
C)  $1 million 
D)  none of the above

Question 12

It appears that target companies capture most of the gains in hostile takeovers.

Accepted Answer

A) True 
 B)False

Question 13

Firm A has a value of $200 million, and B has a value of $120 million. Merging the two would allow a cost savings with a present value of $30 million. Firm A purchases B for $130 million. How much do firm A's shareholders gain from this merger?

Accepted Answer

A)  $30 million 
B)  $20 million 
C)  $15 million 
D)  $10 million

Question 14

The PEN Corporation with a book value of $20 million and a market value of $30 million has merged with the CNC Corporation with a book value of $6 million and a market value of
$8 million at a price of $9 million. If the transaction is a purchase then the total assets on the books of the new company will be:

Accepted Answer

A)  $38 million 
B)  $39 million 
C)  $29 million 
D)  $26 million

Question 15

Which of the following is not a major item of US antitrust legislation? I) Garn-St. Germain Act
II) Clayton Act
III) Hart-Scott-Rodino Act

Accepted Answer

A)  I only 
B)  II only 
C)  III only 
D)  II and III only

Question 16

Following an acquisition, the acquiring firm's balance sheet shows an asset labeled
"goodwill." What form of merger accounting is being used?

Accepted Answer

A)  Consolidation 
B)  Aggregation 
C)  Purchase 
D)  None of the above

Question 17

Who gains most in mergers?

Accepted Answer

The answer of Who gains most in mergers?...

Question 18

The following are pre-offer defenses: litigation, asset structuring and liability structuring.

Accepted Answer

A) True 
 B)False

Question 19

Market for corporate control includes the following:
I. Mergers
II. Spin-offs and divestitures
III. Leveraged buyouts (LBOs)
IV. Privatizations

Accepted Answer

A)  I only 
B)  I and II only 
C)  I, II, and III only 
D)  I, II, III, and IV

Question 20

The BP and Amoco merger is an example of:
I. Cross-border merger
II. Horizontal merger
III. Economies of scale

Accepted Answer

A)  I only 
B)  I and II only 
C)  I, II, and III only 
D)  III only

Exam 31: Mergers

A poison pill protects the rights of shareholders.

Briefly explain what is meant by economic gain from merger?

Antitrust law can be enforced by the federal government by: I. a civil suit brought by the Justice Department II. a proceedings initiated by the Federal Trade Commission (FTC) III. a proceedings initiated by the Securities and Exchange Commission (SEC)

In the purchase method of merger accounting a new asset category called goodwill is created.

An example of a shark-repellent charter amendment is: I. Supermajority II. Waiting period III. Restricted voting rights IV. Staggered board

A dissident group solicits votes in an attempt to replace existing management. This is called a:

Accounting changes by the Financial Accounting Standards Board (FASB) in the US:

As a defensive maneuver, a firm issues deep-discount bonds that are redeemable at par in the event of an unfriendly takeover. These bonds are an example of:

A poison pill defense is implemented by

Given the following data: If Firm A offers 250,000 shares for B's shareholders, calculate the true cost of merger:

It appears that target companies capture most of the gains in hostile takeovers.

Firm A has a value of $200 million, and B has a value of $120 million. Merging the two would allow a cost savings with a present value of $30 million. Firm A purchases B for $130 million. How much do firm A's shareholders gain from this merger?

Which of the following is not a major item of US antitrust legislation? I) Garn-St. Germain Act II) Clayton Act III) Hart-Scott-Rodino Act

Following an acquisition, the acquiring firm's balance sheet shows an asset labeled "goodwill." What form of merger accounting is being used?

Who gains most in mergers?

The following are pre-offer defenses: litigation, asset structuring and liability structuring.

Market for corporate control includes the following: I. Mergers II. Spin-offs and divestitures III. Leveraged buyouts (LBOs) IV. Privatizations

The BP and Amoco merger is an example of: I. Cross-border merger II. Horizontal merger III. Economies of scale