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- As a merger arbitrageur you are considering an investment in two target companies of a merger, A and B. The deal spread for A is 16 % and for B the deal spread is 8 %. Which of the following statements is correct? O A. The probability of deal failure is higher for A than for B. O B. The probability of deal failure is higher for B than for A.Which of the following statements regarding merger deals is (are) correct? Choose all correct answer(s) On average, the price of the target increases substantially, while the price of the bidder does not increase by much. If the premium paid by the bidder exceeds the expected additional value to be created through the merger, the bidder's share price is likely to drop on the announcement of the bid. A bidder can often acquire a public-listed company for less than its current market value. Synergies are by far the most common justification that bidders give for the premium they pay for a target.help - only answer is ok
- If an acquisition does not create value and the market is smart, then the: Multiple Choice earnings per share of the acquiring firm must be the same both before and after the acquisition. earnings per share can change but the stock price of the acquiring firm should remain constant. price per share of the acquiring firm should increase because of the growth of the firm. earnings per share will most likely increase while the price-earnings ratio remains constant. price-earnings ratio should remain constant regardless of any changes in the earnings per share.Which of the following statements is most CORRECT? Oa. The primary rationale for most operating mergers is synergy. Ob. In most mergers, the benefits of synergy and the premium the acquirer pays over the market price are summed and then divided equally between the shareholders of the acquiring and target firms. Oc. Financial theory says that the choice of how to pay for a merger is really irrelevant because, although it may affect the firm's capital structure, it will not affect its overall required rate of return. Od. The basic rationale for any financial merger is synergy and, thus, the estimation of pro forma cash flows is the single most important part of the analysis. Oe. The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the 2 firms will have similar betas.The following graph represents the Cumulative Average Abnormal Return (CAAR) for the stocks of companies targeted for take-over. Which of the following statements is true? a. In a weak form efficient market, t* is the actual takeover event (i.e. the time when the legal takeover transaction is completed) b. In a semi-strong form efficient market, t* is the takeover announcement event c. In a strong form efficient market, t* is the acquiring company takeover decision event (i.e. the time when an acquiring company decides to launch a takeover) d. (a) & (b) e. (b) & (c)
- Do solve it as soon as possible Identify which statement is not correct. In a takeover bid to acquire a part or all shares in another company: Select one: a. Friendly merger reduces the chance of overpaying for target’s shares. b. Successful acquirer is likely to pay more for target’s shares in scenarios that include multiple rival bidders. c. Target company management would not accept an offer where the consideration for target’s shares exceeds the NPV of the merger. d. Hostile takeover may result in overpaying for target’s shares.If stock market returns for merged firms are positive, which motives for horizontal merger would be supported? If stock market returns were negative, which motives would be supported? PORLook at a recent example of a merger announcement, and log on to the website of the acquiring company. What reasons does the acquirer give for buying the target? How does it intend to pay for the target—with cash, shares, or a mixture of the two? Can you work out how much the target’s shareholders will gain from the offer? Is it more or less than would be the case for an average merger? Now log on to finance.yahoo.com and find out what happened to the stock price of the acquiring company when the merger was announced. Were shareholders pleased with the announcement?
- Which of the following statements is most CORRECT? Oa. Managers who purchase other firms often assert that the new combined firm will enjoy benefits from diversification, including more stable earnings. However, since shareholders are free to diversify their own holdings, and at what's probably a lower cost, diversification benefits is generally not a valid motive for a publicly held firm. Ob. The smaller the synergistic benefits of a particular merger, the greater the scope for striking a bargain in negotiations, and the higher the probability that the merger will be completed. Oc. Since mergers are frequently financed by debt rather than equity, a lower cost of debt or a greater debt capacity are rarely relevant considerations when considering a merger. Od. Operating economies are never a motive for mergers. Oe. Tax considerations often play a part in mergers. If one firm has excess cash, purchasing another firm exposes the purchasing firm to additional taxes. Thus, firms with excess…Which of the following strategy would you adopt if you expect the fall in prices of a stock? A. Buy a call B. Sell a call C. Sell a put D. Buy a futureIdentify the correct statement related to the choice of exercise price for buying a call. Select one: O a. the higher the exercise price the higher the call premium O b. the lower the exercise price the more likely the call option will expire out-of-the-money O c. A higher strike price results in smaller gains on the upside but smaller losses on the downside O d. the higher the exercise price the more dividends contribute to the overall profit