Question 1

Firm A is acquiring Firm B for $40,000 in cash. Firm A has 2,500 shares of stock outstanding at a market value of $18 a share. Firm B has 1,500 shares of stock outstanding at a market price of $25 a share. Neither firm has any debt. The net present value of the acquisition is $2,500. What is the value of Firm A after the acquisition?

Accepted Answer

A)   $40,000
B)   $42,500
C)   $45,000
D)   $47,500
E)   $50,000F) C) and D)
G) A) and D)

Question 2

A change in the corporate charter making it more difficult for the firm to be acquired by increasing the percentage of shareholders that must approve a merger offer is called a:

Accepted Answer

A)   supermajority amendment.
B)   standstill agreement.
C)   greenmail provision.
D)   poison pill amendment.
E)   white knight provision.F) C) and D)
G) A) and D)

Question 3

Firm V was worth $450 and Firm A had a market value of $375. Firm V acquired Firm A for $425 because they thought the combination of the new Firm VA was worth $925. What is the synergy from the merger of Firm V and Firm A?

Accepted Answer

A)   $50
B)   $100
C)   $475
D)   $500
E)   None of these.F) A) and B)
G) B) and E) B

Question 4

The acquisition of a firm whose business is not related to that of the bidder is called a _____ acquisition.

Accepted Answer

A)   conglomerate
B)   forward
C)   backward
D)   horizontal
E)   verticalF) A) and C)
G) A) and D)

Question 5

Principal,Inc. is acquiring Secondary Companies for $29,000 in cash. Principal has 2,500 shares of stock outstanding at a market price of $30 a share. Secondary has 1,600 shares of stock outstanding at a market price of $15 a share. Neither firm has any debt. The net present value of the acquisition is $4,500. What is the price per share of Principal after the acquisition?

Accepted Answer

A)   $30.00
B)   $30.70
C)   $31.80
D)   $32.10
E)   $32.50F) B) and E)
G) A) and C)

Question 6

Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 2,300 shares of stock outstanding at a market price of $20 a share. Firm B has 1,800 shares outstanding at a price of $15 a share. What is the value of the merged firm?

Accepted Answer

A)   $73,000
B)   $75,000
C)   $76,667
D)   $77,778
E)   $78,000F) A) and D)
G) All of the above

Question 7

When a building supply store acquires a lumber mill it is making a ______ acquisition.

Accepted Answer

A)   horizontal
B)   longitudinal
C)   conglomerate
D)   vertical
E)   complementary resourcesF) All of the above
G) A) and B)

Question 8

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

Accepted Answer

A)   tender offer.
B)   shareholder derivative action.
C)   proxy contest.
D)   management freeze-out.
E)   shareholder's revengE.F) A) and E)
G) A) and D)

Question 9

A public offer by one firm to directly buy the shares of another firm is called a:

Accepted Answer

A)   merger.
B)   consolidation.
C)   tender offer.
D)   spinoff.
E)   divestiturE.F) A) and B)
G) B) and C)

Question 10

In a merger or acquisition,an asset should be acquired if it:

Accepted Answer

A)   generates a positive net present value to the shareholders of an acquiring firm.
B)   is a firm in the same line of business in which the acquirer has expertise.
C)   is a firm in a totally different line of business which will diversify the firm.
D)   pays a large dividend which will provide a cash pass through to the acquirer.
E)   None of these.F) B) and E)
G) A) and B)

Question 11

Suppose that General Motors has made an offer to acquire General Mills. Ignoring potential antitrust problems,this merger would be classified as a:

Accepted Answer

A)   monopolistic merger.
B)   horizontal merger.
C)   vertical merger.
D)   conglomerate merger.
E)   None of these.F) B) and D)
G) A) and B)

Question 12

The Peris Co. is planning on merging with the Thornton Co. Peris will pay Thornton's stockholders the current value of their stock in shares of Peris. Peris currently has 2,300 shares of stock outstanding at a market price of $20 a share. Thornton has 1,800 shares outstanding at a price of $15 a share. How many shares of stock will be outstanding in the merged firm?

Accepted Answer

A)   1,800 shares
B)   2,300 shares
C)   2,750 shares
D)   3,650 shares
E)   4,100 sharesF) C) and E)
G) B) and C)

Question 13

An attempt to gain control of a firm by soliciting a sufficient number of stockholder votes to replace the current board of directors is called a:

Accepted Answer

A)   tender offer.
B)   proxy contest.
C)   going-private transaction.
D)   leveraged buyout.
E)   consolidation.F) A) and E)
G) A) and D)

Question 14

Alexandra's is being acquired by David's,Inc. for $20,000 worth of David's stock. Miller has 1,300 shares of stock outstanding at a price of $20 a share. Holiday has 1,000 shares outstanding with a market value of $18 a share. The incremental value of the acquisition is $2,000. What is the total number of shares in the new firm?

Accepted Answer

A)   1,000 shares
B)   1,300 shares
C)   1,500 shares
D)   2,000 shares
E)   2,300 sharesF) All of the above
G) B) and E)

Question 15

A reason for acquisitions is synergy. Synergy includes:

Accepted Answer

A)   revenue enhancements.
B)   cost reductions.
C)   lower taxes.
D)   All of these.
E)   None of these.F) B) and C)
G) B) and E)

Question 16

ABC and XYZ are all-equity firms. ABC has 1,750 shares outstanding at a market price of $20 a share. XYZ has 2,500 shares outstanding at a price of $28 a share. XYZ is acquiring ABC for $36,000 in cash. The incremental value of the acquisition is $3,000. What is the net present value of acquiring ABC to XYZ?

Accepted Answer

A)   $1,000
B)   $2,000
C)   $3,000
D)   $4,000
E)   $5,000F) D) and E)
G) B) and E) B

Question 17

Which one of the following combinations of firms would benefit the most through the use of complementary resources?

Accepted Answer

A)   A ski resort and a travel trailer sales outlet
B)   A golf resort and a ski resort
C)   A hotel and a home improvement center
D)   A swimming pool distributor and a kitchen designer
E)   A fast food restaurant and a dry cleanerF) C) and D)
G) B) and C) B

Question 18

The distribution of shares in a subsidiary to existing parent company stockholders is called a(n) :

Accepted Answer

A)   lockup transaction.
B)   bear hug.
C)   equity carve-out.
D)   spin-off.
E)   split-up.F) C) and E)
G) B) and E)

Question 19

Describe the three basic legal procedures that one firm can use to acquire another and briefly discuss the advantages and disadvantages of each.

Accepted Answer

The three forms are merger,acquisition o...

Question 20

A financial device designed to make unfriendly takeover attempts financially unappealing,if not impossible,is called:

Accepted Answer

A)   a golden parachute.
B)   a standstill agreement.
C)   greenmail.
D)   a poison pill.
E)   a white knight.F) All of the above
G) A) and D)

Exam 29: Mergers, Acquisitions, and Divestitures

Correct Answer
verified

A change in the corporate charter making it more difficult for the firm to be acquired by increasing the percentage of shareholders that must approve a merger offer is called a:

Correct Answer
verified

Firm V was worth $450 and Firm A had a market value of $375. Firm V acquired Firm A for $425 because they thought the combination of the new Firm VA was worth $925. What is the synergy from the merger of Firm V and Firm A?

Correct Answer
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B

The acquisition of a firm whose business is not related to that of the bidder is called a _____ acquisition.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

When a building supply store acquires a lumber mill it is making a ______ acquisition.

Correct Answer
verified

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

Correct Answer
verified

A public offer by one firm to directly buy the shares of another firm is called a:

Correct Answer
verified

In a merger or acquisition,an asset should be acquired if it:

Correct Answer
verified

Suppose that General Motors has made an offer to acquire General Mills. Ignoring potential antitrust problems,this merger would be classified as a:

Correct Answer
verified

Correct Answer
verified

An attempt to gain control of a firm by soliciting a sufficient number of stockholder votes to replace the current board of directors is called a:

Correct Answer
verified

Correct Answer
verified

A reason for acquisitions is synergy. Synergy includes:

Correct Answer
verified

Correct Answer
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B

Which one of the following combinations of firms would benefit the most through the use of complementary resources?

Correct Answer
verified
B

The distribution of shares in a subsidiary to existing parent company stockholders is called a(n) :

Correct Answer
verified

Describe the three basic legal procedures that one firm can use to acquire another and briefly discuss the advantages and disadvantages of each.

Correct Answer
verified
The three forms are merger,acquisition o...
View Answer

A financial device designed to make unfriendly takeover attempts financially unappealing,if not impossible,is called:

Correct Answer
verified

Exam 29: Mergers, Acquisitions, and Divestitures

Correct AnswerverifiedShow Answer

A change in the corporate charter making it more difficult for the firm to be acquired by increasing the percentage of shareholders that must approve a merger offer is called a:

Correct AnswerverifiedShow Answer

Firm V was worth $450 and Firm A had a market value of $375. Firm V acquired Firm A for $425 because they thought the combination of the new Firm VA was worth $925. What is the synergy from the merger of Firm V and Firm A?

Correct AnswerverifiedB

The acquisition of a firm whose business is not related to that of the bidder is called a _____ acquisition.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a building supply store acquires a lumber mill it is making a ______ acquisition.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A public offer by one firm to directly buy the shares of another firm is called a:

Correct AnswerverifiedShow Answer

In a merger or acquisition,an asset should be acquired if it:

Correct AnswerverifiedShow Answer

Suppose that General Motors has made an offer to acquire General Mills. Ignoring potential antitrust problems,this merger would be classified as a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An attempt to gain control of a firm by soliciting a sufficient number of stockholder votes to replace the current board of directors is called a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A reason for acquisitions is synergy. Synergy includes:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedB

Which one of the following combinations of firms would benefit the most through the use of complementary resources?

Correct AnswerverifiedB

The distribution of shares in a subsidiary to existing parent company stockholders is called a(n) :

Correct AnswerverifiedShow Answer

Describe the three basic legal procedures that one firm can use to acquire another and briefly discuss the advantages and disadvantages of each.

Correct AnswerverifiedThe three forms are merger,acquisition o...View AnswerShow Answer

A financial device designed to make unfriendly takeover attempts financially unappealing,if not impossible,is called:

Correct AnswerverifiedShow Answer

Correct Answer
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B

Correct Answer
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B

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B

Correct Answer
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Correct Answer
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The three forms are merger,acquisition o...
View Answer

Correct Answer
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