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?
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?