FIN 302 Final Exam
Ch. 26 M&A is an attempt to gain control of a firm by soliciting enough stockholder votes to replace existing management
-Proxy contest
Ch. 15 Raising Capital Reality of venture capital
-access to venture capital is limited (market is hard to tap into) -Incredibly expensive -very specialized in what industries the firms choose
Ch. 26 M&A what 3 ways can takeovers occur
-acquisitions -proxy contests -going-private transactions
Ch. 17 Dividend & Payout policy real world factors favoring high dividend payout
-desire for current income from individuals -resolution of uncertainty -sell at higher price (all else held constant) -corp investors receive big tax break on dividends if they own stock in another corp
Ch. 26 M&A cost reduction
-economies of scale -economies of vertical integration (easier coordination) -complementary resources
Ch. 26 M&A all publicly owned stock in a firm is replaced with complete equity ownership by a private group
-going-private transactions
Ch. 26 M&A advantage of merger
-legally simple -cheap
Ch. 26 M&A elements of revenue enhancement
-marketing gains -strategic benefits -increase in market power
Ch. 16 Financial Leverage & Capital structure policy assumptions of M&M Proposition I
-no taxes -no bankruptcy costs
Ch. 16 Financial Leverage & Capital structure policy assumption of m&m proposition ii
-no taxes -there is default risk
Ch. 17 Dividend & Payout policy tax exempt investors include
-pension -endowment -trust fund
Ch. 15 Raising Capital what types of funds do venture capital firms pool from
-pension funds -insurance companies -large comps -university endowments
Ch. 17 Dividend & Payout policy real world factors favoring low dividend payout
-taxes (effective tax rate of dividends will be high for investors ) -flotation costs (value of stock decreases if we sell new stock) -dividend restrictions
Ch. 15 Raising Capital Why does underpricing exist?
-young risky firms must underprice to attract investors -few IPO buyers will actually get the initial high average returns observed in IPOs, and many will actually lose money -insurance for the investment banks -reward from the banks to investors revealing true worth
Ch. 17 Dividend & Payout policy The ex-dividend date is _____ business day(s) prior to the date of record.
1
Ch. 15 Raising Capital 3 types of underwriting
1. Firm commitment 2. Best efforts 3. Dutch auction
Ch. 15 Raising Capital what services do underwriters perform
1. Formulating the method used to issue the securities 2. Pricing the new securities 3. Selling the new securities
Ch. 16 Financial Leverage & Capital structure policy Debt has two distinguishing features we have yet to consider:
1. Interest paid on debt is tax deductible 2. Failure to meet debt obligations can result in bankruptcy
Ch. 15 Raising Capital steps for issuing LT debt
1. Issue must be registered with the SEC 2. Prospectus is required 3. Registration statement for a public issue of bonds is different from the one for common stock (for bonds it must indicate an indenture)
Ch. 15 Raising Capital Procedure for issuing securities
1. Management must obtain approval from board of directors 2. Firm must prepare a registration statement 3. SEC examines registration statement during a waiting period, during which time the firm may distribute copies of a preliminary prospectus 4. Firm cannot sell securities during waiting period, but oral offers can be made 5. On effective date of registration statement, a price is determined and a full-fledged selling effort gets underway
Ch. 15 Raising Capital Why do stock prices decline following announcement of a new equity issue
1. Managerial info (manager feels stock is over priced) 2. Debt usage (company cannot raise debt) 3. Issue costs (issuing shares costs money) 4. Dilution (shares carry less power)
Ch. 26 M&A Basic legal procedures one firm can use to acquire another firm
1. Merger or consolidation 2. Acquisition of stock 3. Acquisition of assets
Ch. 26 M&A Possible cash flow benefits of mergers and acquisitions fall into four basic categories:
1. Revenue enhancement 2. Cost reductions 3. Lower taxes 4. Reductions in capital needs
Ch. 16 Financial Leverage & Capital structure policy Why rely on internal financing?
1. Selling securities to raise cash can be expensive 2. If managers believe their stock is undervalued, they do not want to issue equity because they don't want to sell it too cheaply (or negatively indicate something to the market)
Ch. 15 Raising Capital two basic forms of direct private LT financing
1. Term loans 2. Private Placements
Ch. 26 M&A tax free status requirements
1. business purposes 2. continuity of equity interest
Ch. 16 Financial Leverage & Capital structure policy Parts of systematic risk of the firms equity has two parts
1. business risk 2. financial risk
Ch. 15 Raising Capital how can firms offer securities to underwriting firms?
1. competitive basis (cheaper) 2. negotiated offer (most common)
Ch. 15 Raising Capital differences btwn direct private long-term financing and public issues of debt
1. direct private LT avoids cost of SEC registration 2. Direct is likely to have more restrictive covenants 3. Public issues are harder to renegotiate 4. Life insurance companies and pension funds dominate the private placement segment of the bond market 5. costs of distributing bonds are lower in the private market
Ch. 26 M&A how to avoid mistakes in an acquisition
1. do not ignore market value 2. only focus on incremental CF 3. use correct discount rate 4. Be aware of transactions costs
Ch. 15 Raising Capital What are the two types of public issues
1. general cash offer 2. rights offer
Ch. 15 Raising Capital qualifications for rule 415
1. investment grade 2. no default on debt in past 3 years 3. MV of firms outstanding stock greater than 150 million 4. cant violate SEC act 1934 in past 3 years
Ch. 15 Raising Capital long performance of IPO stocks
1. investors who buy IPO stocks at the issue price see a good first day return 2. 2015 investors who bought the stock at the close of the first day and held for 3 years lost on average 18.7%
Ch. 16 Financial Leverage & Capital structure policy Implications of pecking order
1. no target cap structure 2. profitable firm uses less debt 3. companies want financial slack (be able to finance projects quicker and not need to sell equity)
Ch. 17 Dividend & Payout policy how to accomplish a stock repurchase
1. open market purchase 2. tender offer 3. targeted purchase
Ch. 17 Dividend & Payout policy why is the theory that dividend paying firms are declining beginning to be reversed
1. reduction in personal tax rates 2. newly listed firms are beginning maturity 3. post dot com crash to represent stability
Ch. 26 M&A determinants of using cash or common stock in an acquisition are
1. sharing gains 2. taxes 3. control (cash you don't lost voting control)
Ch. 15 Raising Capital 4 patterns of the cost of selling stock
1. substantial economies of scale 2. Costs associated with selling debt are less than the costs of selling equity 3. IPOs have higher expenses than SEOs 4. Straight bonds are cheaper to float than convertible bonds
Ch. 17 Dividend & Payout policy Types of dividends
1.Regular cash dividends 2.Extra dividends 3.Special dividends 4.Liquidating dividends
Ch. 17 Dividend & Payout policy The last date on which you can purchase shares of stock and still receive the next dividend is the date that is _____ business day(s) prior to the date of record.
2
Ch. 17 Dividend & Payout policy an example of stock dividend
20% means a shareholder receives one new share for every 5 currently owned
Ch. 17 Dividend & Payout policy an example of stock split
3:1 for every old share it splits into 3 new shares
Ch. 15 Raising Capital when does the quiet period end
40 calendar days after an IPO
Ch. 16 Financial Leverage & Capital structure policy borrowing issue!!1
Borrowing saves a firm money on its corporate taxes, but the more a firm borrows, the more likely it is that the firm will become bankrupt and have to pay the bankruptcy tax.
Ch. 26 M&A occurs when the bidder and the target firm are in unrelated lines of business
Conglomerate acquisition
Ch. 17 Dividend & Payout policy the date on which dividend checks are mailed
Date of payment
Ch. 17 Dividend & Payout policy the date by which a holder must be on record to be designated to receive a dividend
Date of record
Ch. 17 Dividend & Payout policy the date on which the board of directors passes a resolution to pay a dividend
Declaration date
Ch. 15 Raising Capital whenever a firm sells shares to the general public, but dilution of ownership of existing shareholders can be avoided by using a rights offering
Dilution of proportionate ownership
Ch. 17 Dividend & Payout policy the time pattern of dividend payout
Dividend policy
Ch. 15 Raising Capital the offer price is set based on competitive bidding by investors
Dutch auction underwriting/ uniform price auction (new for IPO market)
Ch. 15 Raising Capital common platform for issuing tokens
Ethereum
Ch. 17 Dividend & Payout policy the date one business day before the date of record, establishing those individuals entitled to a dividend
Ex-dividend date
Ch. 15 Raising Capital T/F when a company issues a new security it is always required to register it with the SEC
False if it is sold to less than 35 investors it is deemed private and doesn't need to
Ch. 16 Financial Leverage & Capital structure policy T/F EPS is not as sensitive to changes in EBIT
False; EPS is more sensitive to changes in EBIT because financial leverage is employed
Ch. 15 Raising Capital T/F all IPO's are debt offers
False; always cash offers
Ch. 15 Raising Capital T/F debt cannot be shelf registered but equity can
False; both can
Ch. 17 Dividend & Payout policy T/F. Dividend policy by itself can raise the dividend at one date while keeping it the same at all other dates
False; it cannot
Ch. 16 Financial Leverage & Capital structure policy T/F changes in cap structure does not effect firms debt and equity
False; it does
Ch. 17 Dividend & Payout policy T/F Under current tax law, a repurchase does not have a significant tax advantage over a cash dividend
False; it does!
Ch. 15 Raising Capital provision which gives the members of the underwriting group the option to purchase additional shares from the issuer at the offering price (Intended to cover excess demand and over-subscriptions)
Green shoe provision
Ch. 26 M&A is an acquisition of a firm in the same industry as the bidder
Horizontal acquisition
Ch. 15 Raising Capital company's first equity issue made available to the public
IPO or unseasoned new issue
Ch. 15 Raising Capital A provision allowing companies to raise money by selling equity through crowdfunding (limit was later raised to a maximum of $50 million)
JOBS act
Ch. 16 Financial Leverage & Capital structure policy states the value of the firm is independent of the firm's capital structure (capital structure is irrelevant)
M&M Proposition I
Ch. 16 Financial Leverage & Capital structure policy states a firm's cost of equity capital is a positive linear function of the firm's capital structure as investors demand higher return for more risk
M&M Proposition II:
Ch. 15 Raising Capital loans (usually long-term) provided directly by a limited number of investors
Private placements
Ch. 17 Dividend & Payout policy cash payments made by a firm to its owners in the normal course of business, usually paid four times per year
Regular cash dividends
Ch. 17 Dividend & Payout policy what is the options of free cash flow
Retain -project invest - increase cash rev Payout -repurchase shares -pay dividends
Ch. 15 Raising Capital venture capital late stage venture
Series C or D....
Ch. 26 M&A an agreement between firms to cooperate in pursuit of a joint goal
Strategic alliance
Ch. 26 M&A the positive incremental net gain associated with the combination of two firms through a merger or acquisition
Synergy
Ch. 26 M&A refers to the transfer of control of a firm from one group of shareholders to another
Takeover
Ch. 15 Raising Capital direct business loans of typically one to five years
Term loans
Ch. 15 Raising Capital T/F underwriter buys the securities for less than the offering price and accepts the risk of not being able to sell them
True
Ch. 16 Financial Leverage & Capital structure policy T/F higher the effective tax rate, the greater the incentive to borrow
True
Ch. 15 Raising Capital T/F capital funds operate like a mutual fund
True: the firms raise the investment pools and the managers make investments for the investors
Ch. 15 Raising Capital investment firms that act as intermediaries between a company selling securities and the investing public
Underwriters
Ch. 26 M&A exists when firms do not use as much debt as they are able to, making them potential acquisition candidates
Unused debt capacity
Ch. 26 M&A involves firms at different steps of the production process
Vertical acquisition
Ch. 26 M&A in a taxable acquisition, the assets of the selling firm are revalued from their historic book value to their estimated current market value
Write-up effect results
Ch. 15 Raising Capital Drop in value of the existing stock following the announcement of a new issue
abnormal return
Ch. 15 Raising Capital what is an example of an indirect cost of selling securities
abnormal return
Ch. 26 M&A purchase the firm's voting stock with an exchange of cash, shares of stock, or other securities
acquisition of stock
Ch. 15 Raising Capital period after a new issue is initially sold to the public
aftermarket
Ch. 15 Raising Capital What did Title 3 change of the JOBS act
allows small investors access to the crowdfunding portals
Ch. 15 Raising Capital investors that use their own money and focus on smaller deals
angel investorrs
Ch. 26 M&A unfriendly takeover offer designed to be so attractive that the target firm's management has little choice but to accept it
bear hug
Ch. 15 Raising Capital the underwriter sells as much of the issue as possible, but can return any unsold shares to the issuer without financial responsibility
best efforts
Ch. 26 M&A acquiring firm
bidder
Ch. 15 Raising Capital Process of soliciting information about buyers and the prices and quantities they would demand
bookbuilding
Ch. 16 Financial Leverage & Capital structure policy equity risk that comes from the nature of the firm's operating activities
business risk; greater of this risk = greater cost of equity
Ch. 16 Financial Leverage & Capital structure policy How should a firm choose its D/E ratio?
capital structure that maximizes the value of the firm
Ch. 15 Raising Capital When the market-to-book ratio is less than 1, increasing the number of shares....
cause EPS to go down (this is accounting dilution, not market value dilution)
Ch. 17 Dividend & Payout policy argument states that stocks attract particular groups based on dividend yield and the resulting tax effects
clientele effect
Ch. 26 M&A cash or securities offered
consideration
Ch. 26 M&A merger in which an entirely new firm is created and both the acquired firm and the acquiring firm cease to exist
consolidation
Ch. 26 M&A the target responds to an unfriendly overture by offering to buy the bidder
counter-tender offer
Ch. 15 Raising Capital practice of raising small amounts of capital from a large number of people
crowd funding
Ch. 26 M&A Firms often sell or threaten to sell major assets—crown jewels—when faced with a takeover threat
crown jewel
Ch. 15 Raising Capital loss in existing shareholders' value in terms of ownership, market value, book value, or EPS
dilution
Ch. 15 Raising Capital a firm arranges for its stock to be listed on an exchange without marketing and other help from an underwriter
direct listing
Ch. 17 Dividend & Payout policy payment made by a firm to its owners from sources other than current or accumulated retained earnings
distribution
Ch. 26 M&A sale of assets, operations, divisions, and/or segments of a business to a third party
divestiture
Ch. 17 Dividend & Payout policy % of net income/ eps
dividend payout
Ch. 17 Dividend & Payout policy % of market price
dividend yield
Ch. 26 M&A sale of stock in a wholly owned subsidiary via an IPO
equity carve-out
Ch. 17 Dividend & Payout policy dividends that may or may not be repeated in thee future
extra dividends
Ch. 26 M&A a requirement that all selling shareholders receive the same price from a bidder
fair price provision
Ch. 15 Raising Capital T/F there is underpricing involved in dutch auction
false
Ch. 17 Dividend & Payout policy T/F owners equity changes in stock split
false
Ch. 17 Dividend & Payout policy T/F share repurchase does have an effect on total earnings
false
Ch. 26 M&A T/F Acquisition is occasionally friendly
false
Ch. 26 M&A T/F goodwill is amortized
false
Ch. 26 M&A T/F stock financing is more common than cash
false
Ch. 26 M&A T/F target firm will cease to exist if acquiring firm purchases all its assets
false it just sold off its assets
Ch. 26 M&A T/F acquisition of assets is cheap
false its cheap
Ch. 17 Dividend & Payout policy T/F Dividend-paying companies tend to raise dividends only before earnings have risen
false they do it after earnings rise
Ch. 16 Financial Leverage & Capital structure policy direct and indirect costs associated with going bankrupt or experiencing financial distress
financial distress
Ch. 16 Financial Leverage & Capital structure policy firm relies on debt
financial leverage
Ch. 16 Financial Leverage & Capital structure policy the equity risk that comes from the financial policy (the capital structure of the firm)
financial risk
Ch. 15 Raising Capital the underwriter buys the entire issue, assuming full financial responsibility for any unsold shares
firm commitment underwriting (most common)
Ch. 16 Financial Leverage & Capital structure policy what does the WACC tell us
firm's overall cost of capital; weighted average of the costs of the various components of the firm's capital structure
Ch. 15 Raising Capital an issue of securities offered for sale to the general public on a cash basis
general cash offer
Ch. 26 M&A Some target firms provide compensation to top-level managers if a takeover occurs
golden parachute
Ch. 26 M&A the difference between the purchase price and the estimated fair market value of the net assets (assets - liabilities)
goodwillI,
Ch. 26 M&A In a targeted repurchase, a firm buys a certain amount of its own stock from an individual investor, usually at a substantial premium. the payments made to potential bidders to eliminate unfriendly takeover are
greenmail
Ch. 15 Raising Capital difference btwn underwriters' buying price and offering price
gross spread
Ch. 15 Raising Capital common form of venture capital in later stage of company
growth equity
Ch. 17 Dividend & Payout policy investors can transform the corporation's dividend policy into a different policy by buying or selling on their own
homemade dividend policy
Ch. 16 Financial Leverage & Capital structure policy borrowing and lending on their own
homemade leverage
Ch. 16 Financial Leverage & Capital structure policy When will the D/E ration represent the optimal capital structure
if it results in lowest WACC
Ch. 16 Financial Leverage & Capital structure policy costs of avoiding a bankruptcy filing incurred by a financially distressed firm
indirect bankruptcy costs
Ch. 17 Dividend & Payout policy the market's reaction to a change in corporate dividend payout
information content effect
Ch. 15 Raising Capital initial sale of a token on a digital currency platform
initial coin offerings (icos)
Ch. 26 M&A typically an agreement between firms to create a separate, co-owned entity established to pursue a joint goal
joint venture
Ch. 16 Financial Leverage & Capital structure policy Firms with a greater risk of experiencing financial distress will borrow...
less than firms with a lower risk of financial distress
Ch. 17 Dividend & Payout policy dividends paid when some or all of the business has been sold off
liquidating dividend
Ch. 26 M&A option granted to white knight
lockup
Ch. 15 Raising Capital specify how long insiders must wait after an IPO before they can sell the stock
lockup agreements (not required by law)
Ch. 16 Financial Leverage & Capital structure policy static theory is more prevalent to
long-run financial goals
Ch. 15 Raising Capital when NPV of a project is negative, which causes the market price to drop
market value dilution
Ch. 16 Financial Leverage & Capital structure policy claims to stockholders and bondholders
marketed claims
Ch. 26 M&A complete absorption of one company by another, wherein the acquiring firm retains its identity and the acquired firm ceases to exist as a separate entity
merger
Ch. 26 M&A disadvantage of merger
must be approved by a vote of the stockholders of each firm
Ch. 16 Financial Leverage & Capital structure policy claims to gov't and litigants
non-marketed claims
Ch. 17 Dividend & Payout policy when a firm purchases its own stock, just as anyone would buy shares of a particular stock, and the firm does not reveal itself as the buyer
open market
Ch. 15 Raising Capital when an offer is priced above the file range
partial adjustment pheenomenon
Ch. 16 Financial Leverage & Capital structure policy theory that firms prefer to use internal financing first whenever possible, then issue debt, then issue equity
pecking-order theory
Ch. 26 M&A generally has a flip-in provision that significantly increases the cost to a shareholder who is attempting to gain control over a firm
poison pill
Ch. 15 Raising Capital label for the rapid growing area equity financing for nonpublic companies
private equity
Ch. 16 Financial Leverage & Capital structure policy as D/E ratio rises
probability that the firm will be unable to pay its bondholders what was promised to them
Ch. 15 Raising Capital a legal document describing details of the issuing corporations and the proposed offering to potential investors
prospectus
Ch. 26 M&A which requires the assets of the target firm be reported at fair market value on the books of the bidder
purchase accounting method,
Ch. 15 Raising Capital all communications with the public must be limited to ordinary announcements and other purely factual matters
quiet period
Ch. 15 Raising Capital a statement filed with the SEC that discloses all material information concerning the corporation making a public offering
registration statement
Ch. 17 Dividend & Payout policy stock split in which a firm's number of shares outstanding is reduced
reverse splits
Ch. 15 Raising Capital a public issue of securities in which securities are first offered to existing shareholders
rights offer/ rights offering
Ch. 15 Raising Capital issued rights to buy a specified number of new shares from the firm at a specified price within a specified time, after which the rights are said to expire
rights offering/privileged subscription
Ch. 15 Raising Capital Underwriter and company management will do presentations in multiple cities, pitching the stock
road shows
Ch. 15 Raising Capital new equity issue of securities by a company that has previously issued securities to the public
seasoned equity offering
Ch. 15 Raising Capital venture capital initial investment
seed or angel
Ch. 15 Raising Capital venture capital early stage venture
series A or B
Ch. 26 M&A provisions allowing existing stockholders to purchase stock at some fixed price should an outside takeover bid come up, discouraging hostile takeover attempts
share rights plans (SRP)
Ch. 15 Raising Capital terms of the rights offering
share warrants
Ch. 26 M&A any tactic (a poison pill, for example) designed to discourage unwanted merger offers
shark repellent
Ch. 15 Raising Capital a company may register all issues it expects to sell within two years at one time, with subsequent sales permitted at any time within those two years
shelf registration
Ch. 15 Raising Capital what does Rule 415 allow
shelf registration
Ch. 16 Financial Leverage & Capital structure policy pecking order theory is more prevalent to
shorter-run goals, tactical issue of raising external funds to finance investments
Ch. 17 Dividend & Payout policy dividends that are one-time events that will not be repeated
special dividends
Ch. 26 M&A the splitting up of a company into two or more companies
split-up
Ch. 16 Financial Leverage & Capital structure policy a firm borrows up to the point where tax benefit from extra dollar in debt equals cost that comes from increased probability of financial distress
static theory of cap structure
Ch. 17 Dividend & Payout policy payment made by a firm to its owners in the form of stock, diluting the value of each share outstanding
stock dividend
Ch. 17 Dividend & Payout policy increase in a firm's shares outstanding without any change in owners' equity
stock split
Ch. 16 Financial Leverage & Capital structure policy M&M Proposition II cost of equity says
straight line with slope of (Ra - Rd)
Ch. 15 Raising Capital group of underwriters formed to share the risk and help sell an issue
syndicate
Ch. 26 M&A firm that is sought
target firm
Ch. 26 M&A difference between tax free and taxable acquisition
tax free is seen as an exchange not a sale (no cap gain or loss)
Ch. 17 Dividend & Payout policy the firm announces to all its stockholders that it is willing to buy a fixed number of shares at a specific price
tender offeer
Ch. 26 M&A public offer by one firm to directly buy the shares of another firm
tender offer
Ch. 16 Financial Leverage & Capital structure policy what does the extended pie model state
these claims can be paid from only one source: the cash flows (CF) of the firm
Ch. 15 Raising Capital grant the holder the right to use the company's service in the future
token
Ch. 15 Raising Capital T/F an underwriter is not required in a rights offering
true
Ch. 15 Raising Capital T/F rights offerings are cheaper than cash offers
true
Ch. 16 Financial Leverage & Capital structure policy T/F Firm value is maximized when WACC is. minimized
true
Ch. 16 Financial Leverage & Capital structure policy T/F WACC doesn't depend on the debt-equity ratio
true
Ch. 16 Financial Leverage & Capital structure policy T/F WACC is the appropriate discount rate for the firm's overall cash flows
true
Ch. 16 Financial Leverage & Capital structure policy T/F extended pie model implied total value is unaltered by cap structure but actually marketed claims
true
Ch. 16 Financial Leverage & Capital structure policy T/F increase in market claims decreases identically to non market claims
true
Ch. 16 Financial Leverage & Capital structure policy T/F most US companies have low D/E ratio
true
Ch. 16 Financial Leverage & Capital structure policy T/F taxes are increased as leverage is increased
true
Ch. 17 Dividend & Payout policy T/F dividend policy merely establishes the trade-off between dividends at one date and dividends at another date
true
Ch. 17 Dividend & Payout policy T/F stock prices rise when the current dividend is unexpectedly increased, and they fall when the dividend is unexpectedly decreased
true
Ch. 17 Dividend & Payout policy T/F # of companies that pay dividends has declined
true
Ch. 17 Dividend & Payout policy T/F -Investors prefer higher dividends to lower dividends at any single date if the dividend level is held constant at every other date
true
Ch. 17 Dividend & Payout policy T/F accounting treatment is not the same for stock splits and stock dividend
true
Ch. 17 Dividend & Payout policy T/F dividend can b cash or stock
true
Ch. 17 Dividend & Payout policy T/F dividend growth is smoother than earnings growth
true
Ch. 17 Dividend & Payout policy T/F dividends are taxed to receipents
true
Ch. 17 Dividend & Payout policy T/F in a share repurchase EPS rises
true
Ch. 17 Dividend & Payout policy T/F stock splits and stock dividend increase number of shares outstanding and reduce value per share
true
Ch. 17 Dividend & Payout policy T/F. share repurchase reduces number of shares outstanding
true
Ch. 26 M&A Complete absorption of one firm by another requires a merger
true
Ch. 26 M&A T/F In an acquisition by stock, no shareholder meetings must be held and no vote is required
true
Ch. 26 M&A T/F In an acquisition by stock, the bidding firm can deal directly with the shareholders of the target firm by using a tender offer
true
Ch. 26 M&A T/F Shareholders in bidder firms seem to neither win nor lose very much, at least on average
true
Ch. 26 M&A T/F Standstill agreements often occur at the same time that a targeted repurchase is arranged
true
Ch. 26 M&A T/F acquisition of assets involves transferring titles
true
Ch. 26 M&A T/F acquisition of assets requires formal vote from shareholders
true
Ch. 26 M&A T/F diversification does not create value
true
Ch. 26 M&A T/F using common stock for acquisition the cost is higher
true
Ch. 26 M&A T/F write up is taxed
true
Ch. 15 Raising Capital T/F underwriter is legally bound to use best efforts
true; but doesn't guarantee an amount of money
Ch. 15 Raising Capital underwriter sells the shares to the public for more than they paid for the shares to the company
underpricing
Ch. 16 Financial Leverage & Capital structure policy cost of capital for a firm that has no debt, and it is represented by RU
unlevered cost of capital
Ch. 16 Financial Leverage & Capital structure policy when does a firm become bankrupt
value of assets = value of its debt
Ch. 15 Raising Capital Financing for new, often high risk ventures
venture capital
Ch. 26 M&A A firm facing an unfriendly merger offer might arrange to be acquired by a different, friendly firm.
white knight
Ch. 17 Dividend & Payout policy in a repurchase a shareholder pays taxes only if
•. Shareholder actually chooses to sell; and • Shareholder has a capital gain on the sale