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Debt issues not secured by specific assets are called debentures.True or False
Answer:
When one company acquires another, year over year historical earnings comparisons
for the acquiring firm are unaffected. True or False
Answer:
Corporate anti-takeover defenses are necessarily a sign of bad corporate governance.
True or False
Answer:
Proxy contests and tender offers are often viewed by acquirers as inexpensive ways to
takeover another firm. True or False
Answer:
In a cash purchase of assets. the target's shareholders could be taxed twice, once when
the firm pays taxes on any gains and a second time when the proceeds from the sale are
paid to the shareholders either as a dividend or distribution following liquidation of the
corporation.
True or False
Answer:
Cost savings are likely to be greatest when firms with dissimilar operations are
consolidated. True or False
Answer:
From the viewpoint of the seller or target company shareholder, transactions may be
tax-free or entirely or partially taxable.
True or False
Answer:
When news about the integration is bad, it is critical never to share it with employees.
True or False
Answer:
Employee benefit plans seldom create significant liabilities for buyers. True or False
Answer:
Voluntary bust-ups or liquidations by the parent firm reflect management's judgment
that the sale of individual parts of the firm could realize greater value than the value
created by a continuation of the combined corporation. True or False
Answer:
A typical consent decree for firms involved in a merger requires the merging parties to
divest overlapping businesses or to restrict anticompetitive practices. True or False
Answer:
A divestiture is the sale of all or substantially all of a company or product line to
another party for cash or securities. True or False
Answer:
The effects of synergy resulting from combining the acquirer and target firms do not
affect the acquirer's ability to finance the transaction. True or False
Answer:
The management integration team's primary responsibilities should be to focus on
achieving long-term profit goals, monitoring actual performance to the goals of the
integration plan, and on cost management. True or False
Answer:
Economic distress arises when a firm's growth and investment prospects deteriorate,
causing a reduction in the value of the business due to the deteriorating outlook for the
firm's cash flow.
Answer:
Licensing allows a firm to purchase the right to manufacture and sell another firm's
products within a specific country or set of countries. True or False
Answer:
The variable growth model would be most appropriate for valuing firms in the growth
phase of their product life cycle. True or False
Answer:
A standstill agreement prevents an investor who has signed the agreement from ever
again buying stock in the target firm. True or False
Answer:
The forward triangular merger involves the acquisition subsidiary being merged with
the target and the target surviving. True or False
Answer:
For tax purposes, goodwill created after July 1993 may be amortized up to 15 years and
is tax deductible. Goodwill booked before July 1993 is also tax deductible. True or
False
Answer:
Chapter 11 reorganization often enables creditors to recover relatively more of their
claims than under liquidation. True or False
Answer:
In a type B stock-for-stock reorganization, the acquirer must purchase an amount of
voting stock that comprises at least 50% of the voting power of all of the target's voting
stock outstanding. True or False
Answer:
Business alliances usually exist for decades. True or False
Answer:
An analyst can determine if a country's equity market is likely to be segmented from the
global equity market if the ß derived by regressing returns in the foreign market with
returns on the global equity market is significantly different from one. True or False
Answer:
Efficiencies rarely are considered by antitrust regulators in determining whether to
accept or reject a proposed merger. True or False
Answer:
Both the acquirer and target boards of directors have a fiduciary responsibility to
demand that the merger terms be renegotiated if the value of the offer made by the
bidder changes materially relative to the value of the target's stock or if their has been
any other material change in the target's operations. True or False
Answer:
Bridge financing refers to the temporary financing obtained by the buyer to pay all or a
portion of the purchase price until so-called permanent financing can be arranged. True
or False
Answer:
Because of data limitations, valuation of private firms often requires more subjective
adjustments than for public firms. True or False
Answer:
Successful alliances generally do not hold managers directly accountable for their
actions, since that would tend to stifle risk taking. True or False
Answer:
