Q3. Around the announcement date of a merger, acquiring firm shareholders of large publicly traded firms normally earn a. –20% abnormal returns b. Zero to slightly negative returns c. Zero to 30% positive abnormal returns d. 100% positive abnormal returns e. Zero to slightly positive returns

Q3. Around the announcement date of a merger, acquiring firm shareholders of large publicly traded firms normally earn a. –20% abnormal returns b. Zero to slightly negative returns c. Zero to 30% positive abnormal returns d. 100% positive abnormal returns e. Zero to slightly positive returns

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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QUESTION 1 When a high P/E company pays a 40% premium to buy a low P/E company from a different industry, with the payment in stock. Which of the following is most likely to happen? Target stock price declines because the company will cease to exist. Acquirer stock price increases because acquier will have higher EPS. Target stock price increases because of the premium paid by the acquier. Target shareholder rejects the acquisition.
As an analyst of Firm A, you are investigating the possible acquisition of Firm T. You estimate that investors currently expect a 6% growth in A's earnings and dividends. Under new management this growth rate would be increased to 8%, without any additional capital investment. You are considering a stock swap merger. What is the maximum exchange ratio that you can afford? EPS Dividend/Share Number of Shares Stock Price Firm A $5 $3 1000000 $90 Firm T $1.5 $0.8 600000 $20
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Attempt in Progress Your answer is incorrect. If a company has trading securities, it will report unrealized changes in their value O only when sold. O directly in shareholders' equity. O as part of income. O on the income statement only if there is a loss. eTextbook and Media Save for Later Attempts: 1 of 2 used Submit Ans %24 % 4. 5 7 8 9 t y u f h k
Q1 Which one of the followings is least important for dividend decisions A. Attract institutional investors B. Stability of future earnings C. Flotation cost of issuing new equity D. Maintaining consistency with historic dividend policy F. A sustainable change in earnings Q2 With a right offerings, each shareholder is issued an obligation to buy a specified number of new shares from the firm at a specified price within a specified time, after which the rights expire. True False
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chapter 9 #2 (Continuation of problem 1) Assuming 0.5 common stock, 0.4 debt, and 0.1 preferred stock, the after-tax WACC of the firm is ____________________. A zero-tax investor holding the proportion of securities given in (a) would earn ____________________.
b Preview File Edit View Go Tools Window Help mgt120h-a17.pdf Page 4 of 10 11. Corporations generally issue stock dividends in order to a. Increase the market price per share. b. Exceed shareholders' dividend expectations. c. Increase the marketability of the shares. d. Decrease the amount of capital in the corporation. 12. Units of production is an appropriate depreciation method to use when a. It is impossible to determine the productivity of the asset. b. The asset's use will be constant over its useful life. 13. Goodwill con ho recorded. Cost-Volume-Profit Analysis 90 The Effect Of Prepaid Taxes On Assets And Liabili... O D c. The productivity of the asset varies significantly from one period to another. d. The company is a manufacturing company. Debenture Valuation V CC 7 Search (Cª Ơ Sat Apr 15 3:05 PM
4. Merger analysis - Adjusted present value (APV) approach Wizard Inc., which is considering the acquisition of Global Satellite Corp. (GSC), estimates that acquiring GSC will result in an incremental value for the firm. The analysts involved in the deal have collected the following information from the projected financial statements of the target company: Data Collected (in millions of dollars) Year 1 Year 2 Year 3 EBIT $14.0 $16.8 $21.0 Interest expense 3.0 3.3 3.6 Debt 33.0 39.0 42.0 Total net operating capital 113.3 115.5 117.7 Global Satellite Corp. (GSC) is a publicly traded company, and its market-determined pre-merger beta is 1.00. You also have the following information about the company and the projected statements: • GSC currently has a $28.00 million market value of equity and $18.20 million in debt. • The risk-free rate is 5%, there is a 7.10% market risk premium, and the Capital Asset Pricing Model produces a pre-merger required rate of return on equity SL of 12.10%. •…