Question 1

The primary purpose of a flip-in provision is to:

Accepted Answer

A)   increase the number of shares outstanding while also increasing the value per share.
B)   dilute a corporate raider's ownership position.
C)   reduce the market value of each share of stock.
D)   give the existing corporate directors the sole right to remove a poison pill.
E)   provide additional compensation to any senior manager who loses his or her job as a result of a corporate takeover.F) All of the above
G) A) and B)

Question 2

Prior to the merger, Firm A has $1,250 in total earnings with 750 shares outstanding at a market price per share of $42. Firm B has $740 in total earnings with 220 shares outstanding at $18 per share. Assume Firm A acquires Firm B via an exchange of stock at a price of $20 for each share of B's stock. Both A and B have no debt outstanding. What will the earnings per share of Firm A be after the merger?

Accepted Answer

A)   $2.10
B)   $1.86
C)   $1.95
D)   $2.02
E)   $2.33F) B) and C)
G) C) and D)

Question 3

Biltwell Hotels is acquiring all of the assets of Green Roof Inns. As a result, Green Roof Inns:

Accepted Answer

A)   will become a fully owned subsidiary of Biltwell Hotels.
B)   will remain as a shell corporation unless the shareholders opt to dissolve it.
C)   will be fully merged into Biltwell Hotels and will no longer exist as a separate entity.
D)   and Biltwell Hotels will both cease to exist and a new firm will be formed.
E)   will automatically be dissolved.F) A) and E)
G) All of the above

Question 4

Which one of the following is a disadvantage of a merger?

Accepted Answer

A)   Transferring the title to all the target firm's assets
B)   Disbanding the operations of the target firm
C)   Hiring an underwriter to distribute the IPO shares
D)   Incurring the costs of creating a new legal entity
E)   Seeking approval of the shareholders of both firmsF) D) and E)
G) B) and C)

Question 5

TJ's and Corner Grocery are all-equity firms. TJ's has 2,500 shares outstanding at a market price of $16.70 a share. Corner Grocery has 3,000 shares outstanding at a price of $22.50 a share. Corner Grocery is acquiring TJ's for $45,000 in cash. What is the merger premium per share?

Accepted Answer

A)   $0
B)   $1.30
C)   $1.11
D)   $1.28
E)   $.32F) None of the above
G) D) and E)

Question 6

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) C) and E)
G) C) and D)

Question 7

The Cycle Stop has 1,400 shares outstanding at a market price per share of $10.80. Kate's Wheels has 1,750 shares outstanding at a market price of $13 a share. Neither firm has any debt. Kate's Wheels is acquiring The Cycle Stop for $16,500 in cash. What is the merger premium per share?

Accepted Answer

A)   $.27
B)   $.46
C)   $.99
D)   $1.21
E)   $2.20F) B) and D)
G) B) and C)

Question 8

The Cat Box acquired The Dog House. As part of this transaction, both firms ceased to exist in their prior form and combined to create an all-new entity, Animal World. Which one of the following terms best describes this transaction?

Accepted Answer

A)   Divestiture
B)   Consolidation
C)   Tender offer
D)   Spinoff
E)   ConglomerationF) B) and C)
G) A) and B)

Question 9

Firm A is being acquired by Firm B for $62,000 worth of Firm B stock. The incremental value of the acquisition is $4,300. Firm A has 2,700 shares of stock outstanding at a price of $22 a share. Firm B has 10,400 shares of stock outstanding at a price of $31 a share. What is the actual cost of the acquisition using company stock?

Accepted Answer

A)   $62,000
B)   $62,076
C)   $62,274
D)   $63,780
E)   $62,620F) B) and E)
G) C) and D)

Exam 26: Mergers and Acquisitions

Which one of the following is a disadvantage of a merger?

Correct Answer
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The Cat Box acquired The Dog House. As part of this transaction, both firms ceased to exist in their prior form and combined to create an all-new entity, Animal World. Which one of the following terms best describes this transaction?

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
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Correct Answer
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The primary purpose of a flip-in provision is to:

Correct Answer
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Correct Answer
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Biltwell Hotels is acquiring all of the assets of Green Roof Inns. As a result, Green Roof Inns:

Correct Answer
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The Cycle Stop has 1,400 shares outstanding at a market price per share of $10.80. Kate's Wheels has 1,750 shares outstanding at a market price of $13 a share. Neither firm has any debt. Kate's Wheels is acquiring The Cycle Stop for $16,500 in cash. What is the merger premium per share?

Correct Answer
verified

TJ's and Corner Grocery are all-equity firms. TJ's has 2,500 shares outstanding at a market price of $16.70 a share. Corner Grocery has 3,000 shares outstanding at a price of $22.50 a share. Corner Grocery is acquiring TJ's for $45,000 in cash. What is the merger premium per share?

Correct Answer
verified

Exam 26: Mergers and Acquisitions

Which one of the following is a disadvantage of a merger?

Correct AnswerverifiedShow Answer

The Cat Box acquired The Dog House. As part of this transaction, both firms ceased to exist in their prior form and combined to create an all-new entity, Animal World. Which one of the following terms best describes this transaction?

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 primary purpose of a flip-in provision is to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Biltwell Hotels is acquiring all of the assets of Green Roof Inns. As a result, Green Roof Inns:

Correct AnswerverifiedShow Answer

The Cycle Stop has 1,400 shares outstanding at a market price per share of $10.80. Kate's Wheels has 1,750 shares outstanding at a market price of $13 a share. Neither firm has any debt. Kate's Wheels is acquiring The Cycle Stop for $16,500 in cash. What is the merger premium per share?

Correct AnswerverifiedShow Answer

TJ's and Corner Grocery are all-equity firms. TJ's has 2,500 shares outstanding at a market price of $16.70 a share. Corner Grocery has 3,000 shares outstanding at a price of $22.50 a share. Corner Grocery is acquiring TJ's for $45,000 in cash. What is the merger premium per share?

Correct AnswerverifiedShow Answer

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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Correct Answer
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