Question 1

Since managers' central goal is to maximize stock price, managerial control issues do not interfere with mergers that would benefit the target firm's stockholders.

Accepted Answer

A) True 
 B)False

Question 2

parent holding company sells shares in its subsidiary such that the parent now owns only 65% of the subsidiary and, thus, the tax returns of the parent and its subsidiary can't be consolidated The parent receives annual dividends from the subsidiary of $2,500,000 If the parent's marginal tax rate is 34% and if the exclusion on intercompany dividends is 70%, what is the effective tax rate on the intercompany dividends, and how much net dividends are received?

Accepted Answer

A)  10.2%; $2,245,000 
B)  10.2%; $2,135,000 
C)  23.8%; $1,905,000 
D)  10.2%; $1,750,000 
E)  34.0%; $1,650,000

Exam 26: Mergers

Since managers' central goal is to maximize stock price, managerial control issues do not interfere with mergers that would benefit the target firm's stockholders.