Question 14

What is the most important factor in determining the acquisition price of a merger?

a. the degree to which the acquiring company will pay for the merger with cash

b. the bargaining positions of the two parties

c. the negotiating skills of the two management teams

d. the degree to which the acquiring company will pay for the merger with securities

Question 15

Company X has bought Company Y using Company X's stock. If the price paid exceeds the net asset value, then asset values will be _____.

a. increased to reflect the net asset value

b. equal to the net asset value

c. decreased to reflect the net asset value

d. increased to reflect the price actually paid

Question 18

Which of the following is an accurate statement regarding friendly mergers?

a. Merger conversations are always initiated by the acquiring company.

b. The acquiring company can pay for the merger with its own common stock.

c. Merger conversations are always initiated by the target company.

d. The acquiring company must be smaller than the target company.

Question 19

Each of the following is true of forward contracts EXCEPT:

a. The presence of counterparty risk requires that both parties be morally and financially strong.

b. They are often customized with unique amounts and dates.

c. They involve a delivery of actual goods.

d. They involve little risk of either party defaulting.