The acquisition of stock has the advantage of:
Answer: A
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The PEN Corporation with a book value of $20 million and a market value of $30 million has merged with the CNC Corporation with a book value of $6 million and a market value of $8 million at a price of $9 million. If the transaction is a purchase then the total assets on the books of the new company will be:
Answer: B
Purchase method: 30 + 8 + 1 = 39
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What will earnings per share be for Firm A after the merger assuming that cash is used in the acquisition?
Answer: C
EPS = (500+300)/100 = $8.00
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A dissident group solicits votes in an attempt to replace existing management. This is called a:
Answer: A
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The following are dubious reasons for mergers:
(I) to diversify
(II) increasing the earnings per share (EPS)
(III) lower financing costs
(IV) industry consolidation
Answer: D
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Firm A has a value of $200 million, and B has a value of $120 million. Merging the two would allow a cost savings with a present value of $30 million. Firm A purchases B for $130 million. What is the cost of this merger?
Answer: D
Cost = 130-120 = 10
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Firm A has a value of $200 million, and B has a value of $120 million. Merging the two would allow a cost savings with a present value of $30 million. Firm A purchases B for $130 million. What is the gain from this merger?
Answer: A
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The DOC Corporation with a book value of $20 million and a market value of $30 million has merged with the CIC Corporation with a book value of $6 million and a market value of $8 million at a price of $9 million. If the transaction is a purchase will there be any goodwill, and if so, what is the amount of goodwill?
Answer: C
Purchase method: MV(DOC) + MV(CEC) + Goodwill = 30 + 8 + 1 = 39
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As a defensive maneuver, a firm issues deep-discount bonds that are redeemable at par in the event of an unfriendly takeover. These bonds are an example of:
Answer: D
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Market for corporate control includes the following:
(I) Mergers
(II) Spin-offs and divestitures
(III) Leveraged buyouts (LBOs)
(IV) Privatizations
Answer: D
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