Please choose all that would apply (multiple answers are possible).

1. Toyota is planning to invest $3.5 billion to manufacture batteries in the United States. For which of the following present values of the investment's cash flows does that decision make sense?

1. $2 billion
2. $3 billion
3. $4 billion
4. $5 billion

2. Which of the following is an example of a good incentive?

1. Analysts are afraid to recommend sell for a company's stock because that company may not do business with their employer in the future.
2. Investors want to make money so they invest in companies that are doing well.
3. Pension funds invest in high-quality companies because they want to take care of their retirees.
4. CEOs take large risks with their companies because a good part of their annual compensation is tied to the share price.

3. Which of the following is not directly connected to value creation?

1. Earnings per share
2. Reinvesting profits to grow
3. Gross profits
4. Returns to capital that exceed costs of capital

4. Which of the following is not an example of a valuation multiple?

1. Debts to assets
2. Price to earnings
3. Current assets to current liabilities
4. Market capitalization to EBITDA

5. In September 2016, Bayer announced the acquisition of Monsanto for $66 billion. Which of the

following would not be a concern for Bayer after completing the acquisition of Monsanto?

1. Accurate terminal growth rates
2. Due diligence
3. Realization of synergies
4. Cultural integration

6. Which of the following are reasons for a good management team to conduct a share buyback?

1. Increasing EPS to meet a previously announced target
2. Send a signal that the stock is undervalued
3. Share buybacks will increase the leverage ratio
4. Dividends and share buybacks are taxed differently

7. What are the reasons for an acquisition to fail?

1. The acquiring and target companies have different costs of capital
2. Synergies are not realized
3. The acquiring company overpays for the target company
4. Cultural clashes lead to inefficiencies