+
FIN 444 FINAL EXAM Mergers, Acquisition and Corporate Restructuring EXAM 2016

FIN 444 FINAL EXAM Mergers, Acquisition and Corporate Restructuring EXAM 2016

Rating:
Rating
(0)
Author: Faith Tucker
Description:

FIN 444 FINAL EXAM Mergers, Acquisition and Corporate Restructuring EXAM 2016

(more)
See More
Try a College Course Free

Sophia’s self-paced online courses are a great way to save time and money as you earn credits eligible for transfer to over 2,000 colleges and universities.*

Begin Free Trial
No credit card required

25 Sophia partners guarantee credit transfer.

221 Institutions have accepted or given pre-approval for credit transfer.

* The American Council on Education's College Credit Recommendation Service (ACE Credit®) has evaluated and recommended college credit for 20 of Sophia’s online courses. More than 2,000 colleges and universities consider ACE CREDIT recommendations in determining the applicability to their course and degree programs.

Tutorial

FIN 444 FINAL EXAM EXAM 2016

FIN 444 FINAL EXAM Mergers, Acquisition and Corporate Restructuring EXAM 2016

 

Buy Solutions: http://hwsoloutions.com/downloads/fin-444-final-exam-mergers-acquisition-and-corporate-restructuring-exam-2016/

FIN 444  FINAL EXAM Mergers, Acquisition and Corporate Restructuring EXAM 2016

FIN/444 Mergers, Acquisition and Corporate Restructuring

Final Exam

Which of the following are generally considered restructuring activities?

A merger

An acquisition

A divestiture

A consolidation

All of the above

Which of the following is the most common reason that M&As often fail to meet expectations?

Overpayment

Form of payment

Large size of target firm

Inadequate post-merger due diligence

Poor post-merger communication

An investor group borrowed the money necessary to buy all of the stock of a company. Which of the following

terms best describes this transaction?

Merger

Consolidation

Leveraged buyout

Tender offer

Joint venture

Which of the following is among the least regulated industries in the U.S.?

 

Defenses

Communications

Retailing

Public utilities

Banking

The purpose of the 1968 Williams Act was to

Give target firm shareholders time to review takeover proposals

Prosecute target firm shareholders who misuse information

Protect target firm employees from layoffs

Prevent tender offers

Promote tender offers

All of the following are examples of antitakeover provisions commonly found in state statutes except for

 

Fair price provisions

Business combination provisions

Cash-out provisions

Short-form merger provisions

Share control provisions

Purchasing the target firm’s stock in the open market is a commonly used tactic to achieve all of

the following except for

Acquiring a controlling interest in the target firm without making such actions public knowledge.

Lowering the average cost of acquiring the target firm’s shares

Recovering the cost of an unsuccessful takeover attempt

Obtaining additional voting rights in the target firm

Strengthening the effectiveness of proxy contests

Over the years the U.S. Congress has transferred some of the enforcement of securities laws to organizations other than the SEC such as

 

Public stock exchanges

Financial Accounting Standards Board

Public Accounting Oversight Board

State regulatory agencies

All of the above

Some of Acme Inc.’s shareholders are very dissatisfied with the performance of the firm’s current management team and want to gain control of the board. To do so, these shareholders offer their own slate of candidates for open spaces on the firm’s board of directors. Lacking the necessary votes to elect these candidates, they are contacting other shareholders and asking them to vote for their slate of candidates. The firm’s existing management and board is asking shareholders to vote for the candidates they have proposed to fill vacant seats on the board. Which of the following terms best describes this scenario?

Leveraged buyout

b            Proxy contest

Merger

Divestiture

None of the above

Market profiling requires an analysis of all of the following factors except for:

Customers

Suppliers

Core competencies

Current and potential competitors

Product or service substitutes

FIN 444  FINAL EXAM Mergers, Acquisition and Corporate Restructuring EXAM 2016

All of the following are true about experience curves except for

Applicable primarily to differentiation strategies

Applicable primarily to cost leadership strategies

Reflect declining average unit costs due to increasing accumulated production levels

Reflect both economies of scale and the introduction of more efficient production methods as output increases

Often found in commodity-type industries

Examples of corporate level strategies include which of the following:

 

Growth

Diversification

Operational

Financial

All of the above

The screening process represents a refinement of the search process and commonly utilizes which of the following as selection criteria

Market share, product line, and profitability

Product line, profitability, and growth rate

Profitability, leverage, and growth rate

Degree of leverage, market share, and growth rate

All of the above

Which of the following do not represent typical closing documents in an asset purchase?

Letter of intent

Listing of any liabilities to be assumed by the buyer

Loan and security agreements if the transaction is to be financed with debt

Complete descriptions of all patents, facilities, and investments

Listing of assets to be acquired

Which of the following is not true of the acquisition process?

 

It always follows a predictable sequence of steps.

It sometimes deviates from the sequence outlined in this chapter.

It involves a negotiation phase

It involves the development of a business plan

None of the above

Certain post integration issues are best addressed prior to the closing. These include all of the following except for

Who will pay for employee severance expenses

How will employee payroll be managed during ownership transition

What will be done with checks from customers that the seller continues to receive after closing

How will the seller be reimbursed for monies owed to suppliers for products sold prior to closing

Who will pay for health care and disability claims that often arise just before a business is sold?

 

Which of the following represent commonly used techniques for integrating corporate cultures?

Employees are encouraged to share the same overall goals

“Best practices” in one department are employed in other departments

Multiple businesses share the same service such as the legal department

Employees are co-located

All of the above

Poorly executed integration often results in high employee turnover. The costs of such turnover include which of the following?

 

Declining morale among those that remain

Retraining costs

Declining productivity

Deteriorating customer service

All of the above

Which one of the following factors is not considered in calculating the firm’s cost of equity?

risk free rate of return

beta

interest rate on corporate debt

expected return on equities

difference between expected return on stocks and the risk free rate of return

Which of the following is true of the enterprise valuation model?

Discounts free cash flow to the firm by the cost of equity

Discounts free cash flow to the firm by the weighted average cost of     capital

Discounts free cash flow to equity by the cost of equity

Discounts free cash flow to equity by the weighted average cost of capital

None of the above

The incremental cash flows of a merger can relate to which of the following:

Working capital

Profits

Capital spending

Income taxes

All of the above

Which one of the following is not a commonly used method of valuing target firms?

 

Discounted cash flow

Comparable companies method

Recent transactions method

Asset oriented method

Share exchange ratio method

Intangible assets often constitute a substantial source of value to the acquiring firm.  Which of the following are not generally considered intangible assets?

 

Patents and technical know-how

Warranty and contingent claims

Trademarks and customer lists

Covenants not to compete and franchises

Copyrights and software

Which of the following are examples of intangible assets that may have value to the acquiring company?

 

Patents

Trade names

Customer lists and relationships

Covenants not to compete

All of the above

Which of the following is generally not considered a source of value to the acquiring firm?

 

Duplicate facilities

Patents

Land on the balance sheet at below market value

Warranty claims

Copyrights

Which factors would be considered in determining the feasibility of financing a proposed

takeover?

Potential dilution in EPS of the combined firms.

Impact on overall borrowing costs of the combined firms.

Possible violation of loan covenants on existing debt of the acquiring company

Return on total capital of the combined firms

All of the above.

A merger which is expected to produce synergy

Should be rejected because the synergy will dilute the combined firm’s earnings per share

Should be rejected because the first year’s cash flow is negative

Has a negative NPV

Should be pursued because it creates value

Reduces target firm revenues

All of the following are true of reverse mergers except for.

May be used to take a private firm public

May represent an effective alternative to an IPO

Commonly use private equity placements for financing

Requires 2 years of audited financial statements to take a private firm public

A and B

All of the following represent common sources of value in appraising private or publicly owned businesses except for

Intellectual property

Customer lists

Licenses

Contingent liabilities

Employment contracts

A corporate shell may have value because

It may enable the owner to avoid the costs of going public

The name is widely recognized

It could own the rights to various forms of intellectual property

All of the above

None of the above

Which of the following is a disadvantage of balance sheet adjustments?

Protects buyer from eroding values of receivable before closing

Audit expense

Protects seller from increasing values of receivables before closing

Protects from decreasing values of inventories before closing

Protects seller from increasing values of inventories before closing

Form of payment can involve which of the following:

Cash

Stock

Cash and stock

Rights, royalties and fees

All of the above

Which of the following are not true of net operating loss carrybacks and carryforwards?

Net operating loss carrybacks enable firms to recover previous taxes paid.

Net operating loss carryforwards enable firms to shelter future taxable income.

Net operating loss carryforwards may be applied to income up to 5 years into the future..

Loss corporations” cannot use a net operating loss carry forward unless they remain viable and in essentially the same business for at least 2 years following the closing of the acquisition.

None of the above

The tax status of the transaction may influence the purchase price by

Raising the price demanded by the seller to offset potential tax liabilities

Reducing the price demanded by the seller to offset potential tax liabilities

Causing the buyer to reduce the purchase price if the transaction is taxable to the target firm’s shareholders

Forcing the seller to agree to defer a portion of the purchase price

Forcing the buyer to agree to defer a portion of the purchase price

 

Security provisions and protective covenants are included in loan documents to increase the likelihood that the interest and principal of outstanding loans will be repaid in a timely fashion.  Which of the following is not true about security provisions and protective covenants?

Security features include the assignment of payments due under a specific contract to the lender.

Negative covenants include limits on the amount of dividends that might be paid

Limitations on the amount of working capital that the borrower can maintain.

Periodically, financial statements must be sent to lenders.

Automatic loan repayment acceleration if the borrower is in default on any loans outstanding

LBO investors must be very careful not to overpay for a target firm because

Major competitors tend to become more aggressive when a firm takes on large amounts of debt

High leverage increases the break-even point of the firm

Projected cash flows are often subject to significant error limiting the ability of the firm to repay its debt

A and B only

A, B, and C

Antitrust regulatory authorities tend to look most favorably on which type of alliances?

Equity partnerships

Marketing alliances among competitors

Global alliances

Project oriented ventures involving collaborative research

None of the above

Which of the following is generally true about financing JVs and partnerships?

Lenders rarely require guarantees from the parents

Bank loans are commonly used to meet short-term cash requirements

Participants must agree on an appropriate financial structure for the organization

Contributions by the partners of intangible assets are usually easy to value

Corporations are an uncommon form of legal structure

Which of the following is not true of a divestiture?

May create cash infusion for the parent firm

Parent ceases to exist

Proceeds of sale taxable if returned to shareholders through a dividend or stock buyback

A new legal subsidiary may be created

B and C

A diversified automotive parts supplier has decided to sell its valve manufacturing business. This sale is referred to as a

Merger

Divestiture

Spin-off

Equity carveout

Liquidation

All of the following are true of the bankruptcy process except for

The debtor firm may seek protection from its creditors by initiating bankruptcy or may be forced into bankruptcy by its creditors.

When creditors file for bankruptcy on behalf of the debtor firm, the action is said to be involuntary bankruptcy.

Once either a voluntary or involuntary petition is filed, the debtor firm is protected from any further legal action related to its debts until the bankruptcy proceedings are completed.

The filing of a petition triggers an automatic stay even before the court accepts the request.

An automatic stay suspends all judgments, collection activities, foreclosures, and repossessions of property by the creditors on any debt or claim that arose before the filing of the bankruptcy petition

All of the following represent different forms of debt restructuring except for

 

Debt extensions

Debt compositions

Share exchange ratios

Debt for equity swaps

A and D

Local country firms may be interested in alliances for which of the following reasons?

 

To gain access to the technology

To gain access to a widely recognized brand name

To gain access to innovative products

A, B, and C

A and B only

Which of the following represent common components of the global capital asset pricing model when applied to valuing firms in emerging countries?

 

Risk free rate of return

Specific country’s risk premium

Firm size risk premium

Emerging country firm’s global beta

All of the above

The most common form of payment involving non-U.S. firms engaged in M&As is

 

Stock

Cash

Cash and stock

Debt

Cash, stock and debt

 

FIN 444  FINAL EXAM Mergers, Acquisition and Corporate Restructuring EXAM 2016