Finance Chapter 21 2 Largescale Efforts Make Firm Less Appealing

61.

Large-scale efforts to make a firm less appealing in the midst of a potential merger are known as:

62.

Other things equal, which one of the following groups of stakeholders often lose value as a result of an LBO?

63.

The free-cash-flow theory of takeovers predicts that firms:

64.

A change to the corporate charter that requires that any merger must be approved by a supermajority of shareholders is

known as:

65.

Which of the following is not a mechanism for changing a firm’s management?

66.

Proxy fights generally occur when a group is trying to:

67.

One of the reasons why proxy fights are often unsuccessful is that:

68.

Which one of the following is false concerning a proposed merger of firms?

69.

A public offer to purchase the shares of existing stockholders in order to take the firm over is called a:

70.

When a management team buys the firm from current shareholders while continuing to manage and often incurring large

segments of debt, it is known as a:

71.

If Georgia Pacific (lumber products) were to acquire a national homebuilding firm, the combination would be termed a:

72.

Which one of the following is least likely to provide a motivation for vertical integration?

73.

Cash-rich firms often make questionable acquisitions, rather than pay out the cash to shareholders. This:

74.

Firms with substantial amounts of free cash flow often discover that:

75.

The “Bootstrap Game” is played somewhat in defiance of traditional merger logic in that it:

76.

Mergers that attempt to bootstrap earnings may obtain increased current earnings per share at the expense of:

77.

Firms that are acquired to take advantage of bootstrapping often have:

78.

If two merged firms are shown to have a higher combined market value than the sum of their individual market values, then:

79.

If the shareholders of an acquired firm capture all of the merger’s gain, then the:

80.

Why is it not sufficient to state that a merger should occur simply because the economic gains are positive?

81.

Firms A and B were each currently worth $50 million but generated a $20 million gain when merged. If the cost of the

merger was $5 million, how much did firm A pay for firm B?

82.

When two firms merge, the value of the acquiring firm will change by the:

83.

CBA Corp. is worth $15 million as a stand-alone firm. ABC Corp. has offered 350,000 shares valued at $50 each to acquire

CBA. After the announcement, however, the price of ABC’s shares falls to $45. What was the cost of the merger?

84.

Which one of the following statements is correct concerning the cost of two firms merging? The cost:

85.

Why might shareholders of an acquiring firm prefer to finance mergers with stock rather than with cash?

86.

Realizing the benefits of a merger is easier when the merging companies have differing:

87.

The most likely interpretation of headlines that read “ABC Corp. adopts shark repellent” is that ABC:

88.

Shares of a corporation can, under certain circumstances, be priced at different amounts to different investors under the terms

of a:

89.

What does empirical evidence suggest about the distribution of gains from mergers?

90.

What type of financing is typically instrumental in bringing about leveraged buyouts?

91.

According to the free-cash-flow theory of takeovers, many acquisitions are motivated by:

92.

Firm B’s 1 million shares of stock currently sell for $20 each. Firm A estimates the economic gain from the merger to be $10

million and is prepared to offer $22 cash for each share of B. What percentage of the merger gain will be captured by firm

B’s shareholders?

93.

XYZ Corp has made a cash tender offer for 2 million shares of ABC Corp. at a price of $20, which is $6 higher than ABC’s

current stand-alone value. What is the cost of the merger?

94.

A merger is expected to produce cost savings of $50 million and the acquired firm’s shareholders will receive a premium of

20% over the $150 million value of their firm. The gain of the merger to the acquirer is:

95.

Which one of the following is not a method of changing the management of a firm?

96.

Which one of the following is correct concerning a spin-off?

97.

Splitting one firm into four separate firms is an example of a:

98.

The merger between Uptown Bank and Downtown Bank is an example of a:

99.

If Microsoft were to acquire Dell Computer, it would be an example of a:

100.

Conglomerate mergers involve companies in:

101.

A merger adds value by creating synergies. Which one of these is not a possible source of synergy?

102.

Which one of the following is the most appropriate reason for an acquiring firm’s shareholders to prefer using stock

financing for acquisitions?

103.

Which one of the following statements is correct for a firm that has undergone a leveraged buyout?

104.

Empirical studies show that the operating efficiency of firms having undergone a leverage buyout ______ over the following

3 years.

Chapter 21 Test bank – Static Summary