corporation-finance-test-bank-chapter-26

Chapter26-MergersandAcquisitions26-1Chapter26MergersandAcquisitionsMultipleChoiceQuestions1.Lastmonth,KeyserDesignacquiredalloftheassetsandliabilitiesofTenorMachineWorks.ThecombinedfirmisknownasKeyserDesign.TenorMachineWorksnolongerexistsasaseparateentity.Thisacquisitionisbestdescribedasa:A.merger.B.consolidation.C.tenderoffer.D.spinoff.E.divestiture.2.TheCatBoxacquiredTheDogHouse.Aspartofthistransaction,bothfirmsceasedtoexistintheirpriorformandcombinedtocreateanall-newentity,AnimalWorld.Whichoneofthefollowingtermsbestdescribesthistransaction?A.divestitureB.consolidationC.tenderofferD.spinoffE.conglomeration3.TheDailyNewspublishedanadtodaywhereinitannounceditsdesiretopurchasesharesofacompetingnewspaper,theOilTownGossip.Whichoneofthefollowingtermsisbestdescribedbythisannouncement?A.mergerrequestB.consolidationC.tenderofferD.spinoffE.divestitureChapter26-MergersandAcquisitions26-24.SomeFreightLineExpressshareholdersareverydissatisfiedwiththeperformanceofthefirm'scurrentmanagementteam.Theseshareholderswanttogaincontroloftheboardofdirectorssotheycanhavethepowertooustcurrentmanagement.Asameansofgainingcontrol,theseshareholdershaveselectcandidatesforalloftheopenpositionsonthefirm'sboardofdirectors.Sincetheyhaveinsufficientvotestoguaranteetheelectionoftheseindividuals,theyarecontactingothershareholdersandaskingthemtovotewiththemonthisimportantmatter.Ofcourse,thecurrentmanagementteamisencouragingshareholderstovotefortheircandidatesfortheboard.Whichoneofthefollowingtermsisbestillustratedbythissituation?A.tenderofferB.proxycontestC.going-privatetransactionD.leveragedbuyoutE.consolidation5.Agroupofindividualinvestorsisintheprocessofacquiringallofthepublicly-tradedsharesofOMOutfitters.Oncethesharesareacquired,theywillnolongerbepubliclytraded.Whichofthefollowingtermsappliestothisprocess?A.tenderofferB.proxycontestC.going-privatetransactionD.leveragedbuyoutE.consolidation6.Thecurrentpresidentandvice-presidentsofMountainTopConsultinghavedecidedtoformaprivateinvestmentgroupwiththesolepurposeofpurchasingMountainTopConsulting.Theseindividualshavefoundalenderwhowilllendthem85percentofthepurchasecostiftheypledgetheirpersonalassetsascollateralfortheloan.Thecurrentofficersagreetothisarrangement,borrowthefunds,andpurchaseMountainTopConsulting.Thepurchaseofthisfirmisreferredtoasa:A.conglomeration.B.proxycontest.C.merger.D.leveragedbuyout.E.consolidation.Chapter26-MergersandAcquisitions26-37.JohnsonManufacturersandPeabodyEnterprisesarebothmanufacturersofplasticproducts,suchasplasticplatesandsilverware.Thesetwofirmshavedecidedtoworktogethertofindamoreefficientwaytorecyclerejectedproductssothatanyrejectedmaterialcanbereused.Thus,eachcompanyisgoingtoassigntwoofitsengineerstothisprojectandhaveagreedtoshareanyandallcostsincurredinthisprocess.Thisprojectisanexampleofa:A.consolidation.B.mergedalliance.C.jointventure.D.takeoverproject.E.strategicalliance.8.DietSodaandHighCaffeinearetwofirmsthatcompeteinthesoftdrinkmarket.Thesetwocompetitorshavedecidedtoinvest$10milliontoformanewcompany,FruitTea,whichwillmanufactureflavoredteas.Thisnewfirmisdefinedasa:A.consolidation.B.strategicalliance.C.jointventure.D.mergedalliance.E.takeoverproject.9.AllianceChemicalsrecentlyacquiredSwensonIndustriesinatransactionthatproducedaNPVof$1.3million.ThisNPVisreferredtoas:A.theagencyeffect.B.theconsolidatingvalue.C.diversification.D.theconsolidationeffect.E.synergy.Chapter26-MergersandAcquisitions26-410.RogerisamajorshareholderinRBIndustrialSupply.Currently,Rogerisquiteunhappywiththedirectionthefirmisheadedandisrumoredtobeconsideringanattempttotakeoverthefirmbysolicitingthevotesofothershareholders.Toheadoffthispotentialattempt,theboardofRBIndustrialSupplyhasdecidedtoofferRoger$35ashareforallthesharesheownsinthefirm.Thecurrentmarketvaluepershareis$32.ThisoffertopurchaseRoger'ssharesiscommonlyreferredtoas:A.agoldenparachute.B.standstillpayments.C.greenmail.D.apoisonpill.E.awhiteknight.11.Whichoneofthefollowinggenerallyhasaflip-inprovisionthatsignificantlyincreasesthecosttoashareholderwhoisattemptingtogaincontroloverafirm?A.goldenparachuteB.standstillagreementC.greenmailD.poisonpillE.whiteknight12.MelvinwasattemptingtogaincontrolofWesternWoodProductsuntilherealizedthattheexistingshareholdersinthefirmhadtherighttopurchaseadditionalsharesatabelow-marketpricegivenhishostiletakeoverattempt.Thus,Melvindecidedtoforegoinvestinginthisfirm.WhattermappliestothetacticusedbyWesternWoodProductstostaveoffthistakeoverattempt?A.pac-mandefenseB.sharkrepellentplanC.goldenparachuteprovisionD.greenmailprovisionE.sharerightsplanChapter26-MergersandAcquisitions26-513.NiegerMillsengagesinfarming,truckingoffarmproducts,andthemillingandretailingoffarmgrains.ThefirmhasdecidedtosellitsfarmingoperationstoJasperFarms.Thissaleisreferredtoasa(n):A.liquidation.B.divestiture.C.merger.D.allocation.E.restructuring.14.PrincetonEnterprisesisadiversifiedcompany.Inadditiontoitsprimarybusinessoperations,thefirmisalsothesoleshareholderofawhollyownedsubsidiary.Aspartofitsrestructuringplan,Princetonhasdeci