Question 1

Which of the following is a form of a takeover?
I. tender offer
II. merger
III. proxy contest
IV. going private transaction

Accepted Answer

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

Question 2

Last month, Keyser Design acquired all of the assets and liabilities of Tenor Machine Works. The combined firm is known as Keyser Design. Tenor Machine Works no longer exists as a separate entity. This acquisition is best described as a:

Accepted Answer

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

Question 3

Which of the following represent potential gains from an acquisition?
I. increased use of debt
II. lower costs per unit produced
III. strategic beachhead
IV. diseconomies of scale

Accepted Answer

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

Question 4

If a firm sells its crown jewels when threatened with a takeover attempt, the firm is employing a strategy commonly referred to as a _____ strategy.

Accepted Answer

A)  scorched earth
B)  shark repellent
C)  bear hug
D)  white knight
E)  lockupF) A) and E)
G) B) and D)

Question 5

The Sweet Shoppe and Candy Land are all-equity firms. The Sweet Shoppe has 500 shares outstanding at a market price of $96 a share. Candy Land has 2,500 shares outstanding at a price of $24 a share. The Sweet Shoppe is acquiring Candy Land for $62,000 in cash. The incremental value of the acquisition is $3,600. What is the net present value of acquiring Candy Land to The Sweet Shoppe?

Accepted Answer

A)  $1,100
B)  $1,600
C)  $2,700
D)  $4,200
E)  $5,700F) All of the above
G) A) and D)

Question 6

Down River Markets has decided to acquire a controlling interest in Blue Jays by purchasing shares of stock in the public markets. Which of the following statements correctly apply to this acquisition?
I. The purchase of publicly-traded shares may be more expensive than an outright merger with Blue Jays would have been.
II. Down River Markets can avoid dealing with the board of directors of Blue Jays by purchasing shares in this manner.
III. If Down River Markets is successful in acquiring at least 80 percent of the outstanding shares of Blue Jays, the remaining shareholders in Blue Jays will be forced to also sell their shares to Down River Markets.
IV. Whether or not Down River Markets gains control of Blue Jays depends upon the willingness of Blue Jays shareholders to sell their shares.

Accepted Answer

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

Question 7

Moore Industries has agreed to be acquired by Scott Enterprises for $22,000 worth of Scott Enterprises stock. Scott Enterprises currently has 7,500 shares of stock outstanding at a price of $28 a share. Moore Industries has 1,800 shares outstanding at a price of $12 a share. The incremental value of the acquisition is $1,100. What is the value per share of Scott Enterprises stock after the acquisition?

Accepted Answer

A)  $27.52
B)  $27.96
C)  $28.08
D)  $28.47
E)  $31.03F) B) and D)
G) A) and B)

Question 8

The Daily News published an ad today wherein it announced its desire to purchase shares of a competing newspaper, the Oil Town Gossip. Which one of the following terms is best described by this announcement?

Accepted Answer

A)  merger request
B)  consolidation
C)  tender offer
D)  spinoff
E)  divestitureF) A) and B)
G) D) and E)

Question 9

Nieger Mills engages in farming, trucking of farm products, and the milling and retailing of farm grains. The firm has decided to sell its farming operations to Jasper Farms. This sale is referred to as a(n) :

Accepted Answer

A)  liquidation.
B)  divestiture.
C)  merger.
D)  allocation.
E)  restructuring.F) A) and E)
G) A) and D)

Question 10

In a tax-free acquisition, the shareholders of the target firm:

Accepted Answer

A)  receive income which is considered to be tax-exempt.
B)  gift their shares to a tax-exempt organization and therefore have no taxable gain.
C)  are viewed as having exchanged shares on a dollar-for-dollar basis.
D)  sell their shares to a qualifying entity thereby avoiding both income and capital gains taxes.
E)  sell their shares at cost thereby avoiding the capital gains tax.F) A) and B)
G) B) and D)

Question 11

Which of the following have been suggested as reasons why the stockholders in acquiring firms may not benefit to any significant degree from an acquisition?
I. the price paid for the target firm might equal the target firm's total value
II. management may have priorities other than the interest of the stockholders
III. the takeover market may not be competitive
IV. anticipated merger gains may not be fully achieved

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I, III, and IV only
D)  I, II, and IV only
E)  I, II, III, and IVF) B) and D)
G) All of the above

Question 12

The current president and vice-presidents of Mountain Top Consulting have decided to form a private investment group with the sole purpose of purchasing Mountain Top Consulting. These individuals have found a lender who will lend them 85 percent of the purchase cost if they pledge their personal assets as collateral for the loan. The current officers agree to this arrangement, borrow the funds, and purchase Mountain Top Consulting. The purchase of this firm is referred to as a:

Accepted Answer

A)  conglomeration.
B)  proxy contest.
C)  merger.
D)  leveraged buyout.
E)  consolidation.F) B) and E)
G) A) and B)

Question 13

The value of a target firm to the acquiring firm is equal to:

Accepted Answer

A)  the value of the target firm as a separate entity plus the incremental value derived from the acquisition.
B)  the purchase cost of the target firm.
C)  the value of the merged firm minus the value of the target firm as a separate entity.
D)  the purchase cost plus the incremental value derived from the acquisition.
E)  the incremental value derived from the acquisition.F) A) and C)
G) A) and B)

Question 14

Firms can frequently create synergy by merging and sharing complementary resources with another firm. Give two examples of situations where this would most likely occur.

Accepted Answer

Student examples will vary but should di...

Question 15

Which one of the following statements is correct?

Accepted Answer

A)  The shareholders of an acquired firm are generally given a choice of accepting either cash or shares of stock when the acquisition is tax-free.
B)  To be a tax-free acquisition, the shareholders of an acquired firm must receive shares in the acquiring firm that are equal to 95 percent or less of the value of the shares held in the acquired firm.
C)  The assets of an acquired firm are recorded on the books of the acquiring firm at their current book value regardless of the tax status of the acquisition.
D)  Target firm shareholders demand a higher selling price when an acquisition is a non-taxable event.
E)  If the assets of a firm are written up as part of the acquisition process, the increase in value is considered to be a taxable gain.F) D) and E)
G) C) and E)

Question 16

Aardvark Enterprises has agreed to be acquired by Lawson Products in exchange for $30,000 worth of Lawson Products stock. Lawson has 3,000 shares of stock outstanding at a price of $28 a share. Aardvark has 1,200 shares outstanding with a market value of $23 a share. The incremental value of the acquisition is $1,400. What is the value of Lawson Products after the merger?

Accepted Answer

A)  $79,400
B)  $83,000
C)  $111,600
D)  $113,000
E)  $143,000F) A) and E)
G) B) and C)

Question 17

Glendale Marine is being acquired by Inland Motors for $53,000 worth of Inland Motors stock. Inland Motors has 6,200 shares of stock outstanding at a price of $54 a share. Glendale Marine has 1,700 shares outstanding with a market value of $30 a share. The incremental value of the acquisition is $2,600. What is the total number of shares in the new firm?

Accepted Answer

A)  6,200 shares
B)  7,181 shares
C)  7,229 shares
D)  7,852 shares
E)  7,900 sharesF) C) and E)
G) A) and B)

Question 18

In a merger the:

Accepted Answer

A)  legal status of both the acquiring firm and the target firm is terminated.
B)  acquiring firm retains its pre-merger legal status.
C)  acquiring firm acquires the assets, but not the liabilities, of the target firm.
D)  shareholders of the target firm have little, if any, say as to whether or not the merger occurs.
E)  target firm continues to exist but will be a wholly owned subsidiary of the acquiring firm.F) A) and B)
G) A) and E)

Question 19

Sue's Bakery is planning on merging with Ted's Deli. Sue's will pay Ted's shareholders the current value of their stock in shares of Sue's Bakery. Sue's currently has 4,500 shares of stock outstanding at a market price of $19 a share. Ted's has 2,100 shares outstanding at a price of $20 a share. What is the value of the merged firm?

Accepted Answer

A)  $106,500
B)  $107,800
C)  $125,400
D)  $127,500
E)  $131,600F) B) and D)
G) A) and E)

Exam 26: Mergers and Acquisitions

Correct Answer
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Correct Answer
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Correct Answer
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Which of the following is a form of a takeover? I. tender offer II. merger III. proxy contest IV. going private transaction

Correct Answer
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Which one of the following statements is correct?

Correct Answer
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Firms can frequently create synergy by merging and sharing complementary resources with another firm. Give two examples of situations where this would most likely occur.

Correct Answer
verified
Student examples will vary but should di...
View Answer

In a tax-free acquisition, the shareholders of the target firm:

Correct Answer
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Correct Answer
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In a merger the:

Correct Answer
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The value of a target firm to the acquiring firm is equal to:

Correct Answer
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Correct Answer
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Which of the following represent potential gains from an acquisition? I. increased use of debt II. lower costs per unit produced III. strategic beachhead IV. diseconomies of scale

Correct Answer
verified

Last month, Keyser Design acquired all of the assets and liabilities of Tenor Machine Works. The combined firm is known as Keyser Design. Tenor Machine Works no longer exists as a separate entity. This acquisition is best described as a:

Correct Answer
verified

Correct Answer
verified

The Daily News published an ad today wherein it announced its desire to purchase shares of a competing newspaper, the Oil Town Gossip. Which one of the following terms is best described by this announcement?

Correct Answer
verified

Correct Answer
verified

If a firm sells its crown jewels when threatened with a takeover attempt, the firm is employing a strategy commonly referred to as a _____ strategy.

Correct Answer
verified

Nieger Mills engages in farming, trucking of farm products, and the milling and retailing of farm grains. The firm has decided to sell its farming operations to Jasper Farms. This sale is referred to as a(n) :

Correct Answer
verified

Correct Answer
verified

Exam 26: Mergers and Acquisitions

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is a form of a takeover? I. tender offer II. merger III. proxy contest IV. going private transaction

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Firms can frequently create synergy by merging and sharing complementary resources with another firm. Give two examples of situations where this would most likely occur.

Correct AnswerverifiedStudent examples will vary but should di...View AnswerShow Answer

In a tax-free acquisition, the shareholders of the target firm:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a merger the:

Correct AnswerverifiedShow Answer

The value of a target firm to the acquiring firm is equal to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following represent potential gains from an acquisition? I. increased use of debt II. lower costs per unit produced III. strategic beachhead IV. diseconomies of scale

Correct AnswerverifiedShow Answer

Last month, Keyser Design acquired all of the assets and liabilities of Tenor Machine Works. The combined firm is known as Keyser Design. Tenor Machine Works no longer exists as a separate entity. This acquisition is best described as a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Daily News published an ad today wherein it announced its desire to purchase shares of a competing newspaper, the Oil Town Gossip. Which one of the following terms is best described by this announcement?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a firm sells its crown jewels when threatened with a takeover attempt, the firm is employing a strategy commonly referred to as a _____ strategy.

Correct AnswerverifiedShow Answer

Nieger Mills engages in farming, trucking of farm products, and the milling and retailing of farm grains. The firm has decided to sell its farming operations to Jasper Farms. This sale is referred to as a(n) :

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Student examples will vary but should di...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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