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13 Feb 2018

n general, for an acquisition to be regarded as tax-free acquisition, these conditions should be met:
I- Shareholders of the target firm must receive an equity interest in the acquisition
II- The acquisition should be for business purpose and not to avoid taxes
III- The acquiring firm should offer cash payment for the equity of the target firm
IV- Continuity of equity interest

1) I, II and III only
2) I, II and IV only
3) II, III and IV
4) All of the above

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Jamar Ferry
Jamar FerryLv2
14 Feb 2018

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1.

An Investment Adviser MUST register with the SEC under which ofthe following conditions?

I Whenthere is no state registration available in that state

II Assoon as the adviser manages more than $100 million of assets

III Assoon as the adviser manages more than $110 million of assets

IV Thathas an investment company as a client

a.

I and II only
b.

I and III only
c.

I, II, and IV
d.

I, III, and IV only

2.

In which step of the financial planning process would thefinancial planner identify strengths and weaknesses that will helpor hinder the achievement of the client’s goals?

a.

Step 1 – Establish the relationship
b.

Step 2 – Gather information
c.

Step 3 – Analyze the data

D. Step 4 – Develop the plan

3. An investment adviser suggests you buy a specific mutual fundthrough her company. Which of the following licenses may berelevant to this offer?

I Series6

II Series7

III Series22

IV Series66

A. I only
B.

I and IV only

C. I, II, and IV only
D.

I, II, III, and IV

4.

Which of the following is the logical second step in thebudgeting process?

A. Decide how much is to be saved or invested.
B.

List all the categories and amounts of fixed and discretionaryexpenditures.
C.

Estimate all of the income and income sources for the budgetperiod.

D. Eliminate all discretionary expenditures.

Which of the following statements concerning cash flow planningis correct?

The goal is to maximize net cash flow.

The goal should be to invest for the future, rather thanmaintaining current lifestyle.

The goal should be to identify strengths and weaknesses in theclient’s cash flows.

The goal is to optimize net cash flow.

2.

All the following are advantages of budgeting, EXCEPT:

It helps reveal inefficient uses of resources.

It fosters creativity and judicious risk-taking.

It provides a way of measuring progress toward goals.

It heightens awareness of and attention to the need to setfinancial goals.

3.

Robert and Jennifer are looking to refinance their $400,000mortgage. Which of the following mortgages will allow them to paythe smallest monthly payment this year if they all charge a 5%interest rate?

30-year standard mortgage

30-year biweekly mortgage

30-year balloon mortgage

30-year adjustable rate mortgage

4.

Banks will typically grant home equity loans or lines of creditup to what loan-to-value percentage?

20 percent

40 percent

60 percent

80 percent

5.

Chase, age 26, is just beginning his career as a computeranalysts after completing graduate school. He is engaged andplanning to purchase a home soon after marrying his collegesweetheart. His life stage is somewhat typical for someone in the_____ life stage.

1

2

3

4

6.

Which of the following are appropriate investments for Logan’semergency fund assets?

I Checkingaccount

II Moneymarket accounts

III Short-termcertificates of deposit

IV U.S.Treasury bills

I and III only

II and IV only

II and III only

I, II, III, and IV

In August 1998, AMP launched a hostile $3.3 Billion takeover bidfor the GIO Insurance Group. The takeover took 17 months, and wasfinally concluded in December 1999 when AMP acquired a 100%controlling interest in GIO. Shareholders in GIO were initiallyoffered $5.35 per share, or one AMP share for every four GIOshares. The cash offer represented (approximately) a 30% premium onthe market value of GIO shares. The share exchange, based on AMP’sshare price at the time (around $20) was valued at just over $5.05.Mid December 1998, an independent report by Grant Samuel andAssociates commissioned by GIO, valued GIO shares at between $5.66and $6.71. On 20 December 1998, stock brokers Ord Minnett advisedGIO shareholders to accept the $5.35 offer. KPMG also stated theoffer was generous (as GIO’s shares were only valued between $4.28-$4.49 without the takeover offer).

Required:

(i) List three factors that can motivate hostile takeoveractivity in practice.

(ii) Identify the key risks associated with hostile takeoverbids for the acquirer in practice.

(iii) What actions can a target firm take to defend itselfagainst potential hostile takeover activity?

(iv) What is the purpose of independent valuation reports intakeover activity? What are the limitations (if any) of thesereports?

(v) Explain AMP’s post takeover performance in relation to GIO.What were the factors that contributed to this performance?

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