a.
To discuss: Company GM acquires company F a hypothetical merger is horizontal, conglomerate, or vertical.
a.
Explanation of Solution
The acquiring of company F by company GM is a horizontal merger. A horizontal merger is the consolidation of the firms which are in the similar type of industry. The competition is generally higher among the firms that operate in the similar space.
b.
To discuss: Company F acquires company W a hypothetical merger is horizontal, conglomerate, or vertical.
b.
Explanation of Solution
The type of merger that are involved in the business activities that are not related is known as the conglomerate merger. These types of mergers takes place between various industries or companies that are located in different locations. Company F acquires company W and it is a conglomerate merger
c.
To discuss: Company W acquires company KH a hypothetical merger is horizontal, conglomerate, or vertical.
c.
Explanation of Solution
The type of merger where two firms that manufacture separate services or parts along with the final product’s value chain is known as the vertical merger. Company W acquires company KH and it is a vertical merger
d.
To discuss: Company KH acquires company GM a hypothetical merger is horizontal, conglomerate, or vertical.
d.
Explanation of Solution
The type of merger that are involved in the business activities that are not related is known as the conglomerate merger. These types of mergers takes place between various industries or companies that are located in different locations. Company KH acquires company GM and it is a conglomerate merger
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Chapter 21 Solutions
Fundamentals of Corporate Finance
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- For the calculation of equity weights, the Blank______ value is used. Multiple choice question. historical average book marketarrow_forwardA firm needs to raise $950,000 but will incur flotation costs of 5%. How much will it pay in flotation costs? Multiple choice question. $50,000 $55,000 $55,500 $47,500arrow_forwardQuestion Mode Multiple Choice Question The issuance costs of new securities are referred to as Blank______ costs. Multiple choice question. exorbitant flotation sunk reparationarrow_forward
- What will happen to a company's tax bill if interest expense is deducted? Multiple choice question. The company's tax bill will increase. The company's tax bill will decrease. The company's tax bill will not be affected. The company's tax bill for the next year will be affected.arrow_forwardThe total market value of a firm is calculated as Blank______. Multiple choice question. the number of shares times the average price the number of shares times the future price the number of shares times the share price the number of shares times the issue pricearrow_forwardAccording the to the Blank______ approach for project evaluation, all proposed projects are placed into several risk categories. Multiple choice question. pure play divisional WACC subjectivearrow_forward
- To invest in a project, a company needs $50 million. Given its flotation costs of 7%, how much does the company need to raise? Multiple choice question. $53.76 million $46.50 million $50.00 million $53.50 millionarrow_forwardWhile determining the appropriate discount rate, if a firm uses a weighted average cost of capital that is unique to a particular project, it is using the Blank______. Multiple choice question. economic value added method pure play approach subjective approach security market line approacharrow_forwardWhat are flotation costs? Multiple choice question. They are the costs incurred to issue new securities in the market. They are the costs incurred to insure the payment due to bondholders. They are the costs incurred to meet day to day expenses. They are the costs incurred to keep a project in the business.arrow_forward
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