FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 26: Mergers and Acquisitions

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Multiple Choice

Review LaterAdd Note

Review Later

Consider the following premerger information about Firm X and Firm Y: Assume that Firm X acquires Firm Y by paying cash for all the shares outstanding at a merger premium of $3 per share.Also assume that neither firm has any debt before or after the merger.What is the value of the total equity of the combined firm,XY,if the purchase method of accounting is used?

A) $1,274,000
B) $1,316,000
C) $1,352,000
D) $1,422,000
E) $1,427,000

F) A) and E)
G) B) and E)

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following have been suggested as reasons why the stockholders in acquiring firms may not benefit to any significant degree from an acquisition? I.the price paid for the target firm might equal the target firm's total value II.management may have priorities other than the interest of the stockholders III.the takeover market may not be competitive IV.anticipated merger gains may not be fully achieved

A) I and III only
B) II and IV only
C) I,III,and IV only
D) I,II,and IV only
E) I,II,III,and IV

F) A) and B)
G) B) and D)

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

Alpha is planning on merging with Beta.Alpha will pay Beta's shareholders the current value of their stock in shares of Alpha.Alpha currently has 4,200 shares of stock outstanding at a market price of $40 a share.Beta has 2,500 shares outstanding at a price of $18 a share.The after-merger earnings will be $8,800.What will the earnings per share be after the merger?

Assume the following balance sheets are stated at book value. What will be the value of the equity account on the postmerger balance sheet assuming that Meat Co.purchases Loaf,Inc.and the pooling of interests method of accounting is used.

The Town Crier and The News Express are all-equity firms.The Town Crier has 11,500 shares outstanding at a market price of $26 a share.The News Express has 15,000 shares outstanding at a price of $31 a share.The News Express is acquiring The Town Crier.The incremental value of the acquisition is $4,500.What is the value of The Town Crier to The News Express?

Sleep Tight is acquiring Restful Inns for $52,500 in cash.Sleep Tight has 3,000 shares of stock outstanding at a market price of $38 a share.Restful Inns has 2,100 shares of stock outstanding at a market price of $24 a share.Neither firm has any debt.The incremental value of the acquisition is $1,700.What is the price per share of Sleep Tight after the acquisition?

Johnson Manufacturers and Peabody Enterprises are both manufacturers of plastic products,such as plastic plates and silverware.These two firms have decided to work together to find a more efficient way to recycle rejected products so that any rejected material can be reused.Thus,each company is going to assign two of its engineers to this project and have agreed to share any and all costs incurred in this process.This project is an example of a:

Penn Corp.is analyzing the possible acquisition of Teller Company.Both firms have no debt.Penn believes the acquisition will increase its total aftertax annual cash flows by $3.7 million indefinitely.The current market value of Teller is $103 million,and that of Penn is $151.7 million.The appropriate discount rate for the incremental cash flows is 9 percent.Penn is trying to decide whether it should offer 40 percent of its stock of $127 million in cash to Teller's shareholders.The cost of the cash alternative is _____,while the cost of the stock alternative is _____.

If a firm sells its crown jewels when threatened with a takeover attempt,the firm is employing a strategy commonly referred to as a _____ strategy.

Firm B is being acquired by Firm A for $162,000 worth of Firm A stock.The incremental value of the acquisition is $4,600.Firm A has 8,500 shares of stock outstanding at a price of $36 a share.Firm B has 5,900 shares of stock outstanding at a price of $27 a share.What is the value per share of Firm A after the acquisition?

Which one of the following pairs of businesses could probably benefit the most by sharing complementary resources?

Which of the following are reasons why a firm may want to divest itself of some of its assets? I.to raise cash II.to unload unprofitable operations III.to improve the strategic fit of a firm's various divisions IV.to comply with antitrust regulations

Which of the following statements correctly apply to a merger? I.The titles to individual assets of the acquired firm must be transferred into the acquiring firm's name. II.The merged firm will retain the use of the acquiring company's name. III.The acquiring firm does not have to seek approval for the merger from its shareholders. IV.The shareholders of the acquired company must approve the merger.

An auto maker recently acquired a windshield manufacturer.Which type of an acquisition was this?

Aardvark Enterprises has agreed to be acquired by Lawson Products in exchange for $30,000 worth of Lawson Products stock.Lawson has 3,000 shares of stock outstanding at a price of $28 a share.Aardvark has 1,100 shares outstanding with a market value of $23 a share.The incremental value of the acquisition is $1,400.What is the value of Lawson Products after the merger?

Some Freight Line Express shareholders are very dissatisfied with the performance of the firm's current management team.These shareholders want to gain control of the board of directors so they can have the power to oust current management.As a means of gaining control,these shareholders have select candidates for all of the open positions on the firm's board of directors.Since they have insufficient votes to guarantee the election of these individuals,they are contacting other shareholders and asking them to vote with them on this important matter.Of course,the current management team is encouraging shareholders to vote for their candidates for the board.Which one of the following terms is best illustrated by this situation?

Rosie's has 1,800 shares outstanding at a market price per share of $23.50.Sandy's has 2,500 shares outstanding at a market price of $21 a share.Neither firm has any debt.Sandy's is acquiring Rosie's.The incremental value of the acquisition is $1,200.What is the value of Rosie's to Sandy's?

Down River Markets has decided to acquire a controlling interest in Blue Jays by purchasing shares of stock in the public markets.Which of the following statements correctly apply to this acquisition? I.The purchase of publicly-traded shares may be more expensive than an outright merger with Blue Jays would have been. II.Down River Markets can avoid dealing with the board of directors of Blue Jays by purchasing shares in this manner. III.If Down River Markets is successful in acquiring at least 80 percent of the outstanding shares of Blue Jays,the remaining shareholders in Blue Jays will be forced to also sell their shares to Down River Markets. IV.Whether or not Down River Markets gains control of Blue Jays depends upon the willingness of Blue Jays shareholders to sell their shares.

Firms can frequently create synergy by merging and sharing complementary resources with another firm.Give two examples of situations where this would most likely occur.

Which one of the following defensive tactics is designed to prevent a "two-tier" takeover offer?