Question 1

Bavarian Brew is planning on acquiring Bavarian Sausage in a pure exchange merger. Bavarian Brew's stock is currently trading at $35 and they set the exchange ratio at 0.80. Bavarian Sausage has 75 million shares outstanding which are currently trading at $18 a share.
-How many shares will Bavarian Brew issue in exchange for Bavarian Sausage's shares.

Accepted Answer

A)   75 million
B)   60 million
C)   100 million
D)   50 millionE) B) and C)
F) None of the above

Question 2

Which of the following is (are) not value-enhancing motives for mergers and acquisitions?

Accepted Answer

A)   external expansion
B)   economies of scale and/or scope
C)   diversification
D)   managerial synergiesE) A) and B)
F) A) and C)

Question 3

By the FTC definition,the merger between Exxon and Mobil is a(n)

Accepted Answer

A)   vertical merger.
B)   horizontal merger.
C)   integrated merger.
D)   all of the above.E) None of the above
F) A) and D)

Question 4

Stock market evidence reveals

Accepted Answer

A)   target shareholders receive larger premia in mergers than tender offers.
B)   target shareholders' returns have decreased over time.
C)   target shareholders receive larger premia when there are multiple bidders.
D)   target shareholders receive smaller premia when target management resists.E) B) and D)
F) B) and C)

Question 5

Smart Acquires Snazzy
Smart Products plans to acquire Snazzy Snaps, which will create $8 million in incremental cash flows for Smart each year for the first six years. Smart Products plans to divest Snazzy Snaps at the end of the sixth year for $112,500,000. Smart's beta (b)  is 1.2, and is expected to remain so after the acquisition. The risk free rate is 5 percent and the expected return on the market is 16 percent. Smart Products has a 100 percent equity capital structure which will be maintained post-acquisition.
-Refer to Smart Acquires Snazzy.If Smart Products' beta (b) falls to 0.95 post-acquisition,what would its weighted average cost of capital be?

Accepted Answer

A)   9.05%
B)   18.2%
C)   12.10%
D)   15.45%E) A) and D)
F) A) and C)

Question 6

Company B's resources were completely absorbed by Company A after their merger.The merger between the two companies was a

Accepted Answer

A)   statutory merger
B)   subsidiary merger
C)   consolidation
D)   none of the aboveE) B) and C)
F) A) and C)

Question 7

Milner - Poudre
Milner Manufacturing plans to acquire Poudre Chemicals, by giving Poudre shareholders 1.75 shares of Milner stock per share of Poudre. There are 2 million shares of Poudre Chemicals outstanding, with a pre-merger-offer price of $25 per share, and Milner's pre-offer stock price is $16.50.
-If,six months later at the completion of the merger,Milner's stock price has dropped to $14 per share,what is the completed control premium percentage?

Accepted Answer

A)   -44.0%
B)   -15.15%
C)   -0.50%
D)   -2.0%E) None of the above
F) B) and C)

Question 8

The transformation of a public corporation into a private company by the employees of the corporation itself is called a(n)

Accepted Answer

A)   management buyout
B)   employee stock ownership plan
C)   reverse LBO
D)   reverse mergerE) A) and B)
F) A) and C)

Question 9

Generally speaking,the return associated with acquisitions are higher for

Accepted Answer

A)   debt financed transactions.
B)   equity financed transactions.
C)   cash transactions.
D)   the acquirer than for the target.E) A) and C)
F) All of the above

Question 10

Exhibit 21-1
 
-Refer to Exhibit 21-1.If firms 1 and 2 were to merge what would be the HHI of the industry?

Accepted Answer

A)   2,088
B)   3,488
C)   2,495
D)   1,645E) A) and D)
F) None of the above

Question 11

Bavarian-Bavarian Merger
Bavarian Brew is planning on acquiring Bavarian Sausage in a pure exchange merger. Bavarian Brew's stock is currently trading at $45 and they set the exchange ratio at 1.80. Bavarian Sausage has 75 million shares outstanding which are currently trading at $23 a share.
Twelve months after the merger Bavarian Brew's stock price drops to $37.
-If you owned 200 shares of Bavarian Sausage what would be the control premium?

Accepted Answer

A)   252%
B)   125%
C)   52%
D)   189%E) All of the above
F) A) and D)

Question 12

For Smith and Miller,what is the stock price of the new firm after a cash acquisition?

Accepted Answer

A)   $29
B)   $28.80
C)   $18
D)   $21.50E) B) and D)
F) B) and C)

Question 13

The greater the number of unrelated divisions that a conglomerate firm operates in creates

Accepted Answer

A)   a smaller Herfindahl Index number.
B)   a larger Herfindahl Index number.
C)   a Herfindahl Index number that does not necessarily change.
D)   there is not enough information to determine.E) B) and D)
F) B) and C)

Question 14

Exhibit 21-1
 
-Refer to Exhibit 21-1.If firms 1 and 7 were to merge what is the HHI of the industry?

Accepted Answer

A)   2,050
B)   2,469
C)   2,438
D)   2,945E) A) and D)
F) A) and C)

Question 15

Smith-Miler Merger
Smith Enterprises can acquire Miller, Inc for $250,000 in either cash or stock. Both companies are 100% equity financed. The synergy value of the acquisition for Smith is $35,000. Currently Smith has 25,000 shares outstanding which trade at $29 a share, whereas Miller has 15,000 shares outstanding that trade at $14 a share.
-What is the value of Miller to Smith?

Accepted Answer

A)   $35,000
B)   $245,000
C)   $210,000
D)   $125,000E) A) and B)
F) B) and D)

Question 16

Milner - Poudre
Milner Manufacturing plans to acquire Poudre Chemicals, by giving Poudre shareholders 1.75 shares of Milner stock per share of Poudre. There are 2 million shares of Poudre Chemicals outstanding, with a pre-merger-offer price of $25 per share, and Milner's pre-offer stock price is $16.50.
-What is the control premium being offered by Milner Manufacturing?

Accepted Answer

A)   $3.875 per share
B)   $18.75 per share
C)   $8.50 per share
D)   $14.875 per shareE) A) and B)
F) A) and C)

Question 17

For Smith and Miller,what is the value of the post merger firm if cash is used?

Accepted Answer

A)   $-5,000
B)   $725,000
C)   $720,000
D)   $250,000E) B) and C)
F) A) and D)

Question 18

A merger in which the acquirer maintains the identity of the target as a separate subsidiary or division.

Accepted Answer

A)   subsidiary merger
B)   statutory merger
C)   Subsidiary merger
D)   reverse triangle merger
E)   consolidationF) A) and B)
G) A) and E)

Question 19

Smith-Miler Merger
Smith Enterprises can acquire Miller, Inc for $250,000 in either cash or stock. Both companies are 100% equity financed. The synergy value of the acquisition for Smith is $35,000. Currently Smith has 25,000 shares outstanding which trade at $29 a share, whereas Miller has 15,000 shares outstanding that trade at $14 a share.
-What is the merger premium over Miller's stock price?

Accepted Answer

A)   19%
B)   16%
C)   21%
D)   23%E) None of the above
F) B) and D)

Question 20

A corporate control change like Pepsi's divestiture of its restaurant holdings is called a(n)

Accepted Answer

A)   bust-up
B)   equity carve out
C)   spin-off
D)   split-upE) All of the above
F) B) and D)

Exam 21: Mergers, acquisitions, and Corporate Control

The greater the number of unrelated divisions that a conglomerate firm operates in creates

Correct Answer
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Stock market evidence reveals

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Exhibit 21-1 -Refer to Exhibit 21-1.If firms 1 and 2 were to merge what would be the HHI of the industry?

Correct Answer
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By the FTC definition,the merger between Exxon and Mobil is a(n)

Correct Answer
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For Smith and Miller,what is the stock price of the new firm after a cash acquisition?

Correct Answer
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Correct Answer
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A corporate control change like Pepsi's divestiture of its restaurant holdings is called a(n)

Correct Answer
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Which of the following is (are) not value-enhancing motives for mergers and acquisitions?

Correct Answer
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Generally speaking,the return associated with acquisitions are higher for

Correct Answer
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Exhibit 21-1 -Refer to Exhibit 21-1.If firms 1 and 7 were to merge what is the HHI of the industry?

Correct Answer
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The transformation of a public corporation into a private company by the employees of the corporation itself is called a(n)

Correct Answer
verified

Company B's resources were completely absorbed by Company A after their merger.The merger between the two companies was a

Correct Answer
verified

Correct Answer
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For Smith and Miller,what is the value of the post merger firm if cash is used?

Correct Answer
verified

A merger in which the acquirer maintains the identity of the target as a separate subsidiary or division.

Correct Answer
verified

Exam 21: Mergers, acquisitions, and Corporate Control

The greater the number of unrelated divisions that a conglomerate firm operates in creates

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Stock market evidence reveals

Correct AnswerverifiedShow Answer

Exhibit 21-1 -Refer to Exhibit 21-1.If firms 1 and 2 were to merge what would be the HHI of the industry?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

By the FTC definition,the merger between Exxon and Mobil is a(n)

Correct AnswerverifiedShow Answer

For Smith and Miller,what is the stock price of the new firm after a cash acquisition?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A corporate control change like Pepsi's divestiture of its restaurant holdings is called a(n)

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is (are) not value-enhancing motives for mergers and acquisitions?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Generally speaking,the return associated with acquisitions are higher for

Correct AnswerverifiedShow Answer

Exhibit 21-1 -Refer to Exhibit 21-1.If firms 1 and 7 were to merge what is the HHI of the industry?

Correct AnswerverifiedShow Answer

The transformation of a public corporation into a private company by the employees of the corporation itself is called a(n)

Correct AnswerverifiedShow Answer

Company B's resources were completely absorbed by Company A after their merger.The merger between the two companies was a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For Smith and Miller,what is the value of the post merger firm if cash is used?

Correct AnswerverifiedShow Answer

A merger in which the acquirer maintains the identity of the target as a separate subsidiary or division.

Correct AnswerverifiedShow Answer

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