Question 1

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) D) and E)

Question 2

The shareholders of a target firm benefit the most when:

Accepted Answer

A)  an acquiring firm has the better management team and replaces the target firm's managers.
B)  the management of the target firm is more efficient than the management of the acquiring firm which replaces them.
C)  the management of both the acquiring firm and the target firm are as equivalent as possible.
D)  their current management team is kept in place even though the managers of the acquiring firm are more suited to manage the target firm's situation.
E)  their management team is technologically knowledgeable yet ineffective.F) D) and E)
G) A) and D)

Question 3

A business deal in which all publicly owned stock in a firm is replaced with complete equity ownership by a private group is called a:

Accepted Answer

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

Question 4

Explain the purpose of a standstill agreement and the basics of how it works.

Accepted Answer

A standstill agreement is designed to pr...

Question 5

A classified board is:

Accepted Answer

A)  a communication network that identifies firms that are willing to be acquired
B)  the inclusion a super majority provision to prevent a small number of directors from exerting total control over the board's decisions.
C)  a board where only a portion of the directors are elected in any one year.
D)  a communication network that distributes resumes for potential board candidates.
E)  a listing of criteria that a firm is seeking for a targeted purchase.F) B) and C)
G) C) and E)

Question 6

When evaluating an acquisition,you should:

Accepted Answer

A)  concentrate on book values and ignore market values.
B)  focus on the total cash flows of the merged firm.
C)  include synergies.
D)  ignore any one-time acquisition fees or transaction costs.
E)  ignore any potential changes in management.F) A) and C)
G) B) and E)

Question 7

Which one of the following statements concerning mergers and acquisitions is correct?

Accepted Answer

A)  Generally,two-thirds of the shareholders in each firm must approve a merger.
B)  Acquisitions always result in at least one firm being dissolved.
C)  The net present value of an acquisition should have no bearing on whether or not the acquisition occurs.
D)  Acquisitions of assets are generally quite simple and inexpensive from a legal and accounting perspective.
E)  At least one-half of the shareholders must vote to approve an acquisition of stock.F) A) and D)
G) B) and D)

Question 8

The market values of Firm V and Firm A are $1,800 and $600,respectively.Assume Firm V acquires Firm A at a cost of $650 and creates $150 in synergy.What would be the NPV of this acquisition to Firm V?

Accepted Answer

A)  $50
B)  $100
C)  $125
D)  $150
E)  $0F) B) and C)
G) B) and E)

Question 9

Firm X is being acquired by Firm Y for $35,000 cash which is being provided by retained earnings.The synergy of the acquisition is $5,000.Firm X has 2,000 shares of stock outstanding at a price of $16 a share.Firm Y has 10,200 shares of stock outstanding at a price of $46 a share.What is the value of Firm Y after the acquisition?

Accepted Answer

A)  $534,750
B)  $471,200
C)  $435,000
D)  $468,900
E)  $535,500F) A) and B)
G) B) and D)

Question 10

The empirical evidence strongly indicates that the stockholders of the target firm realize wealth gains while the stockholders in the acquiring firm gain little,if anything,from an acquisition.Although there exists no definitive answer as to why this is the case,several possible explanations have been proposed.List and explain three possible explanations for the minimal returns to the acquiring firm's stockholders.

Accepted Answer

Lack of achieving the expected synergy,m...

Question 11

The acquisition of a firm involved with a different production process stage than the bidder is called a ________ acquisition.

Accepted Answer

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

Question 12

For the acquiring firm,diversification:

Accepted Answer

A)  will automatically produce gains.
B)  will reduce both risk and debt capacity.
C)  may or may not provide financial benefits.
D)  will provide risk reduction for all shareholders' portfolios.
E)  may result in a risk-free firm.F) A) and B)
G) D) and E)

Question 13

Generous compensation packages paid to a firm's top managers in the event of a takeover are referred to as:

Accepted Answer

A)  golden parachutes.
B)  poison puts.
C)  white knights.
D)  shark repellents.
E)  bear hugs.F) B) and E)
G) A) and B)

Exam 29: Mergers,acquisitions,and Divestitures

For the acquiring firm,diversification:

Correct Answer
verified

A business deal in which all publicly owned stock in a firm is replaced with complete equity ownership by a private group is called a:

Correct Answer
verified

The acquisition of a firm involved with a different production process stage than the bidder is called a ________ acquisition.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Explain the purpose of a standstill agreement and the basics of how it works.

Correct Answer
verified
A standstill agreement is designed to pr...
View Answer

The shareholders of a target firm benefit the most when:

Correct Answer
verified

A classified board is:

Correct Answer
verified

Generous compensation packages paid to a firm's top managers in the event of a takeover are referred to as:

Correct Answer
verified

When evaluating an acquisition,you should:

Correct Answer
verified

The market values of Firm V and Firm A are $1,800 and $600,respectively.Assume Firm V acquires Firm A at a cost of $650 and creates $150 in synergy.What would be the NPV of this acquisition to Firm V?

Correct Answer
verified

Correct Answer
verified
Lack of achieving the expected synergy,m...
View Answer

Which one of the following statements concerning mergers and acquisitions is correct?

Correct Answer
verified

Exam 29: Mergers,acquisitions,and Divestitures

For the acquiring firm,diversification:

Correct AnswerverifiedShow Answer

A business deal in which all publicly owned stock in a firm is replaced with complete equity ownership by a private group is called a:

Correct AnswerverifiedShow Answer

The acquisition of a firm involved with a different production process stage than the bidder is called a ________ acquisition.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain the purpose of a standstill agreement and the basics of how it works.

Correct AnswerverifiedA standstill agreement is designed to pr...View AnswerShow Answer

The shareholders of a target firm benefit the most when:

Correct AnswerverifiedShow Answer

A classified board is:

Correct AnswerverifiedShow Answer

Generous compensation packages paid to a firm's top managers in the event of a takeover are referred to as:

Correct AnswerverifiedShow Answer

When evaluating an acquisition,you should:

Correct AnswerverifiedShow Answer

The market values of Firm V and Firm A are $1,800 and $600,respectively.Assume Firm V acquires Firm A at a cost of $650 and creates $150 in synergy.What would be the NPV of this acquisition to Firm V?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedLack of achieving the expected synergy,m...View AnswerShow Answer

Which one of the following statements concerning mergers and acquisitions is correct?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A standstill agreement is designed to pr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Lack of achieving the expected synergy,m...
View Answer

Correct Answer
verified