1. Which of the following is not one of the three types of merger?
a. Vertical M&A
b. Horizontal M&A
c. Proxy contest
d. Conglomerate

2. Which of the following M & As is valid?
a. VA − T = $400,000; VA = $200,000; VT = $205,000
b. VA − T = $390,000; VA = $200,000; VT = $190,000
c. VA − T = $410,000; VA = $200,000; VT = $190,000
d. VA − T = $600,000; VA = $400,000; VT = $210,000

3. Which of the following is a poor motive for M&As as suggested by evidence?
a. Diversification
b. Economies of scale
c. Economies of scope
d. Complementary strengths

4. Which of the following is not a reason for financial synergies?
a. Fewer information problems
b. Reduced average issuing costs
c. Reduced cash flow volatility
d. Increased need of external financing

5. What is the market value of the equity of a firm that has a trailing P/E ratio of 4.5 and expected earnings (E1) of $550,000? The firm is expected to grow at 5 percent.
a. $2,475,000
b. $2,357,143
c. $1,850,000
d. $2,050,099

6. Which of the following cash flow measures should be used in the DCF valuation approach?
a. Cash flow from operations (CFO)
b. Free cash flow
c. Cash flow from investing (CFI)
d. Cash flow from financing

7. Which of the following statements about liquidation valuation is false?
a. Current accounts receivable with good credit firms should be realized at a relatively high percentage of book value.
b. Liquidation value equals book value of current assets plus market value of tangible assets minus the value of the firm’s liabilities from the total estimated liquidation value of all the firm’s assets.
c. Overdue accounts receivable with bad credit firms should be realized at a relatively low percentage of book value.
d. The liquidation valuation approach is not forward-looking.

  • CreatedFebruary 25, 2015
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