88.
If Walt Disney and American Airlines merged, it would be an example of a:
89.
Which of the following is NOT an example of a revenue enhancement that is a result of a
merger?
90.
The merged firm’s ability to generate synergistic cost savings through the joint use of
inputs in producing multiple products is referred to as:
91.
Cost savings not directly due to economies of scope or economies of scale are referred to
as:
92.
Which of the following refers to a firm that is still allowed to continue to operate while the
creditors’ claims are settled using a collective procedure?
93.
Which of the following is an incorrect priority of claims in the event of liquidation? (Note:
The first item would be paid first.)
94.
All of the following are an advantage of prepackaged bankruptcy EXCEPT:
95.
All of the following are problems associated with using the
Z
-score model to make credit
risk evaluations EXCEPT:
96.
Which of the following statements is incorrect?
97.
If Walmart acquires Target, this would be an example of a:
98.
If Verizon buys the Green Bay Packers, this would be an example of a:
99.
If Whole Foods grocery store buys Whole Wheat Bread, this would be an example of a:
100.
Which of the following is a poor justification for a merger?
101.
LD Inc. declared bankruptcy through a Chapter 7 filing. Consider the following data in
millions of dollars and determine the funds available for secured creditors.
• Proceeds from the liquidation of assets = $395
• First mortgage = $100
• Administration expenses associated with the bankruptcy = $2
• Notes payable to the banks = $205
• Subordinated debentures = $350
• Taxes due to federal, state, and other governmental agencies = $12
• Wages due employees (1,000 employees) = $3
102.
LD Inc. declared bankruptcy through a Chapter 7 filing. Consider the following data in
millions of dollars and determine the funds available for secured creditors.
• Proceeds from the liquidation of assets = $395
• First mortgage = $102
• Administration expenses associated with the bankruptcy = $5
• Notes payable to the banks = $205
• Subordinated debentures = $350
• Taxes due to federal, state, and other governmental agencies = $17
• Wages due employees (2,000 employees) = $6
103.
LD Inc. declared bankruptcy through a Chapter 7 filing. Consider the following data in
millions of dollars and determine the funds available for secured creditors.
• Proceeds from the liquidation of assets = $225
• First mortgage = $50
• Administration expenses associated with the bankruptcy = $5
• Notes payable to the banks = $205
• Subordinated debentures = $350
• Taxes due to federal, state, and other governmental agencies = $17
• Wages due employees (2,000 employees) = $6
104.
The main reason for a vertical merger is:
105.
Firm-specific reasons for financial distress include all of the following EXCEPT:
106.
Market-specific reasons for financial distress include all of the following EXCEPT:
107.
HiHo Inc. is evaluating a merger with the following cash flows:
• Years 1 to 3 Incremental Cash Flows: $10 million each year
• Value of incremental cash flows after year 3 as of the end of year 3: $30 million
• Discount rate = 10 percent
What is the most HiHo should pay for this merger?
Essay Questions
108.
How can managers’ personal incentives result in value-destroying mergers and
acquisitions?
109.
Why is NPV valuation an appropriate tool to use in the evaluation of a merger target?
110.
What is the difference between a Chapter 11 and a Chapter 7 bankruptcy?
111.
What is a credit-scoring model?
112.
The Altman’s
Z
-score model has several weaknesses. What are they?
113.
Calculation of Altman’s
Z
-Score: Use the following financial statements for Lake of
Egypt Marina to calculate the Altman’s Z-score for this firm.
114.
List and explain the three dimensions of the revenue-enhancement argument.
115.
List the order for the distribution of the funds from asset liquidation in a bankruptcy.
116.
Calculation of Change in the HHI Associated with a Merger Tractor Supply, Corp.
currently has a 40 percent market share in banking services, followed by Farm Equipment,
Inc., with 30 percent and Plow Mart with 30 percent.
117.
When will the Justice Department most likely to challenge a firm’s application to acquire
another firm? What measure might they use?