25. If a merger is done for __________ reasons, then the combined corporation will be worth more than the two individual corporations (2+2 = 5).
- Expropriation
- Synergy
- Hubris
- Wealth Redistribution
26. A(n) __________ is when a parent company sells shares of a subsidiary to the public.
- Divestiture
- Leveraged Buyout
- Joint Venture
- Equity Carveout
27. Antitakeover measures primarily protect ______________.
- Acquiring firm managers
- Acquiring firm shareholders
- Target firm shareholders
- Target firm managers
28. If investors prefer dividends to capital gains (Bird in the Hand theory is true), then
- The cost of equity will decrease as the retention ratio increases
- The cost of equity will decrease as the payout ratio decreases
- The cost of equity will increase as the retention ratio decreases
- 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.
- Dividend Reinvestment Plans
- Tender Offers
- Dutch auctions
- Clientele Repurchases
30. Any signaling effect of dividends should occur on the ______________.
- Declaration Date
- Ex-Dividend Date
- Record Date
- Payment Date
31. Which statement is TRUE?
- Dividend rights say that shareholders get any remaining assets after all creditors have been paid in bankruptcy
- According to financial theory, shareholder wealth should be unaffected by a two-for-one stock split.
- 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.
- The stock price should fall by the amount of the dividend on the ex-dividend date.
32. Which statement is FALSE?
- In a Stock Swap, the acquiring firm issues shares of stock in order to pay for the acquisition
- A conglomerate merger is between unrelated firms
- 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.
- 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?
- The White Knight defense is when you try to sell yourself to a