Question

25. If a merger is done for __________ reasons, then the combined corporation will be worth more than the two individual corporations (2+2 = 5).

1. Expropriation
2. Synergy
3. Hubris
4. Wealth Redistribution

26. A(n) __________ is when a parent company sells shares of a subsidiary to the public.

1. Divestiture
2. Leveraged Buyout
3. Joint Venture
4. Equity Carveout

27. Antitakeover measures primarily protect ______________.

1. Acquiring firm managers
2. Acquiring firm shareholders
3. Target firm shareholders
4. Target firm managers

28. If investors prefer dividends to capital gains (Bird in the Hand theory is true), then

1. The cost of equity will decrease as the retention ratio increases
2. The cost of equity will decrease as the payout ratio decreases
3. The cost of equity will increase as the retention ratio decreases
4. The cost of equity will increase as the payout ratio decreases

29. _______________ are when the firm buys back a set number of shares on a set date for a specific price.

1. Dividend Reinvestment Plans
2. Tender Offers
3. Dutch auctions
4. Clientele Repurchases

30. Any signaling effect of dividends should occur on the ______________.

1. Declaration Date
2. Ex-Dividend Date
3. Record Date
4. Payment Date

31. Which statement is TRUE?

1. Dividend rights say that shareholders get any remaining assets after all creditors have been paid in bankruptcy
2. According to financial theory, shareholder wealth should be unaffected by a two-for-one stock split.
3. A stock split is a large stock dividend so that you might have twice as many shares with each share being worth half as much.
4. The stock price should fall by the amount of the dividend on the ex-dividend date.

32. Which statement is FALSE?

1. In a Stock Swap, the acquiring firm issues shares of stock in order to pay for the acquisition
2. A conglomerate merger is between unrelated firms
3. A Leveraged Buyout involves creating a new company out of part of your company and then selling shares of the new company to the public.
4. In an asset purchase, the acquiring firm does not assume the liabilities of the target firm.

33. Suppose that prior to a merger the stock price of the target company was $50 and the stock price of the acquiring company was $40. If the acquiring firm agrees to pay 1.5 share of their stock for every share of the target firms stock, then what premium are they offering?

a) 10% b) 20% c) 25% d) 33%

34. Which statement is FALSE?

1. The White Knight defense is when you try to sell yourself to a