Question 1

A junk bond is:

Accepted Answer

A) a low risk bond that pays high yields. 
B) a high-risk bond that pays low yields. 
C) a high-risk bond that pays high yields. 
D) a low risk bond that pays low yields.

Question 2

Bumpstead Inc. is interested in acquiring Blondies Corp. which it has estimated will generate the following cash flows over the next three years ($000)  In addition, Bumpstead thinks there will be $25,000 per year in synergies available at no extra cost. Blondies has 50,000 shares outstanding, and its cost of equity is approximately 14%. If Bumpstead is very conservative, and will not look beyond a three year time horizon to justify an acquisition, how much should it pay per share for Blondies stock?

Accepted Answer

A) $21.95 
B) $20.79 
C) $23.84 
D) None of the above

Question 3

Match between columns
                        Premises: Spinoff

Accepted Answer

The Answer of Divestiture through the creation of a new is...

Question 4

Activist investors unlike most individual investors, buy stock in order to: ​

Accepted Answer

A) Change the firm's management style and strategy ​ 
B) Improve the firm's financial performance and increase stock price ​ 
C) Change the corporate structure which may include spin-offs or changing the dividend policy ​ 
D) All of the above​

Question 5

In corporations that are said to be widely held, no one investor or group owns 51% or more of the stock.

Accepted Answer

A) True 
 B)False

Question 6

Tancesco Inc. is considering acquiring Aldine Corp. which it has estimated will generate the following after tax cash flows over the next three years ($000). After that management expects a growth rate of 3% indefinitely. 
  In addition, Tancesco thinks a merger will produce $40,000 per year in after tax synergies. Aldine has 65,000 shares of common stock outstanding. The company's beta is 1.6, the market is currently returning an average of 12% on stock investments and short term treasury bills are yielding 3%. What should Tancesco be willing to pay per share for Aldine if management is willing to value the acquisition over an indefinitely long time horizon?

Accepted Answer

The answer of Tancesco Inc. is considering acquiring Aldine Corp....

Question 7

Defensive measures to prevent an unfriendly merger do not include:

Accepted Answer

A) convincing the shareholders of the target company not to approve the deal. 
B) seeking a preemptive merger with another acquirer the target's management feels is more desirable. 
C) suing the would-be acquirer for unjust interference with business operations. 
D) trying to get the justice department to view the proposed merger as an antitrust violation.

Question 8

A combination of two entities in which only one legally ceases to exist is:

Accepted Answer

A) a subsidiary. 
B) a parent company. 
C) a consolidation. 
D) a merger.

Question 9

Although the long-term economic and political implications of the megamergers are as yet unclear, the massive accumulation of economic power currently taking place has no potential to change the open and competitive nature of the economy.

Accepted Answer

A) True 
 B)False

Question 10

The maximum purchase price acceptable to the acquiring firm in a merger:

Accepted Answer

A) cannot exceed the pre-merger value of the target firm. 
B) is always equal to the pre-merger value of the target firm. 
C) is always less than the pre-merger value of the target firm. 
D) a and c 
E) None of the above

Question 11

Match between columns
                        Premises: White knight

Accepted Answer

The Answer of A legal device that makes a hostile is...

Question 12

The most likely impetus for a merger between two companies in the same business but in different regions is ____.

Accepted Answer

A) external growth 
B) internal growth 
C) synergy 
D) to form a conglomerate

Question 13

When a target company's management and board of directors feel that a combination would be a good idea and agree to cooperate with an acquirer, the result is commonly called:

Accepted Answer

A) a friendly merger. 
B) a friendly consolidation. 
C) an agreement in principle. 
D) None of the above

Question 14

A combination in which all of the combining companies are dissolved and a new firm is formed is a:

Accepted Answer

A) holding company. 
B) leveraged buyout. 
C) consolidation. 
D) composition.

Question 15

In a consolidation, all of the combining firms cease to exist as separate corporations.

Accepted Answer

A) True 
 B)False

Question 16

The quest for rapid growth is a major reason for which companies undertake acquisitions.

Accepted Answer

A) True 
 B)False

Question 17

In merger analysis, a terminal value represents:

Accepted Answer

A) the estimated value of the target company exactly three years in the future. 
B) the book value of the target's assets at the end of the period of cash flow estimation. 
C) the target's value after a period of detailed cash flow estimation, generally assuming it will grow at a constant rate indefinitely. 
D) the net income of the target company during its last full year prior to acquisition. 
E) None of the above describes the terminal value concept.

Question 18

The maximum purchase price acceptable to an acquiring firm in a merger is equal to the target's pre-merger value.

Accepted Answer

A) True 
 B)False

Question 19

In a merger, all but one of the combining firms ceases to exist as a legal entity.

Accepted Answer

A) True 
 B)False

Question 20

Why don't hostile takeovers create feuds between the stockholders of the companies involved?

Accepted Answer

The answer of Why don't hostile takeovers create feuds between...

Exam 17: Corporate Restructuring

A junk bond is:

Match the following:

Activist investors unlike most individual investors, buy stock in order to:

In corporations that are said to be widely held, no one investor or group owns 51% or more of the stock.

Defensive measures to prevent an unfriendly merger do not include:

A combination of two entities in which only one legally ceases to exist is:

Although the long-term economic and political implications of the megamergers are as yet unclear, the massive accumulation of economic power currently taking place has no potential to change the open and competitive nature of the economy.

The maximum purchase price acceptable to the acquiring firm in a merger:

Match the following:

The most likely impetus for a merger between two companies in the same business but in different regions is ____.

When a target company's management and board of directors feel that a combination would be a good idea and agree to cooperate with an acquirer, the result is commonly called:

A combination in which all of the combining companies are dissolved and a new firm is formed is a:

In a consolidation, all of the combining firms cease to exist as separate corporations.

The quest for rapid growth is a major reason for which companies undertake acquisitions.

In merger analysis, a terminal value represents:

The maximum purchase price acceptable to an acquiring firm in a merger is equal to the target's pre-merger value.

In a merger, all but one of the combining firms ceases to exist as a legal entity.

Why don't hostile takeovers create feuds between the stockholders of the companies involved?

Exam 17: Corporate Restructuring

A junk bond is:

Match the following:

Activist investors unlike most individual investors, buy stock in order to: ​

In corporations that are said to be widely held, no one investor or group owns 51% or more of the stock.

Defensive measures to prevent an unfriendly merger do not include:

A combination of two entities in which only one legally ceases to exist is:

Although the long-term economic and political implications of the megamergers are as yet unclear, the massive accumulation of economic power currently taking place has no potential to change the open and competitive nature of the economy.

The maximum purchase price acceptable to the acquiring firm in a merger:

Match the following:

The most likely impetus for a merger between two companies in the same business but in different regions is ____.

When a target company's management and board of directors feel that a combination would be a good idea and agree to cooperate with an acquirer, the result is commonly called:

A combination in which all of the combining companies are dissolved and a new firm is formed is a:

In a consolidation, all of the combining firms cease to exist as separate corporations.

The quest for rapid growth is a major reason for which companies undertake acquisitions.

In merger analysis, a terminal value represents:

The maximum purchase price acceptable to an acquiring firm in a merger is equal to the target's pre-merger value.

In a merger, all but one of the combining firms ceases to exist as a legal entity.

Why don't hostile takeovers create feuds between the stockholders of the companies involved?

Activist investors unlike most individual investors, buy stock in order to: