25. If a merger is done for __________ reasons, then the combined corporation wi

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).

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

27. Antitakeover measures primarily protect ______________.

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

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

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

31. Which statement is TRUE?

32. Which statement is FALSE?

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?

Explanation / Answer

25. #2 - Synergy Hint: Because merger company is now a different from the two formers. It's like, A+B=C

26. #1 Divestiture Hint: Divestiture is a sale of the property

27. #3 Hint: The target company is the prioritized one among the two parties to be protected against the acquiring company, to avoid "takeover"

28. #4 Hint: Equity = Credit (Additional); Withdrawals = Debit (Deduct.)

29. #4 - Clientele Repurchase Hint: Clientele is a group of clients which the firm needs to buy as "set"

30. #1 Hint: Declared dividends already get effective relative on the date of its declaration

31. #3 - Stock Split Hint: It is the division of shares of stock so that shareholders receive more shares at a proportionately lower value, leaving the total value unchanged.

32. #2 Hint: *As the term suggests.

33. B.) 20% Hint: $50/$40 = 1.25 share is the value of the target company over the acquiring company; Since the acquiring firm agrees for 1.5, that's an addition of 0.25 or, 20% of 1.25.

34. #1 Hint: A White Knight Defense is something of not letting other company to acquire them, because they have the fear to be turnedover.

35. #2 Hint: Joint ventured company do not recognize the individuality of the two or more firms in any other ways

Goodluck!

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