DDDDDDDD

12. Which of the following represent advantages of the comparable companies' valuation method? a. Uses the most accurate market-based valuation at a point in time b. Valuations need to be adjusted to reflect control premiums c. Adjusts for risk of future cash flows d. Adjusts for the timing of future cash flows e. A & B only

A

23. Which of the following is not true about the recommendation that integration should occur rapidly? a. All significant operations of the two firms must be integrated immediately. b. Rapid integration helps to minimize customer attritition. c. Rapid integration reduces unwanted employee turnover. d. Rapid integration reduces employee anxiety. e. None of the above

A

4. Which of the following is not true about the primary responsibilities of the management integration team (MIT)? a. The MIT should direct the daily operations of the individual work teams set up to implement certain activities. b. Focus the organization on meeting ongoing business commitments and operational performance targets c. The creation of an early warning system to determine when performance targets are likely to be missed. d. Establish a rigorous communication program e. Establishing a master schedule of what should be done by whom and by what date.

A

6. Which of the following is not true about real options? a. All investment decisions contain identifiable and measurable real options. b. Under certain circumstances, management may be able to delay their initial investment in a project or M&A. c. Real options may be valued as the expected value of various alternative cash flow projections. d. Real options can be valued using the Black-Sholes method. e. None of the above

A

10. All of the following are true about the challenges of integrating firms with different corporate cultures except for a. Cultural issues can run the gamut from dress codes to compensation b. The acquired firm's overarching culture is generally rapidly accepted by the target firm's employees c. Small companies are usually highly unstructured and informal d. There are often differences in culture even between firms in the same industry e. Integration may be inappropriate if acquirer and acquired firm's cultures are extremely different.

B

11. Intangible assets often constitute a substantial source of value to the acquiring firm. Which of the following are not generally considered intangible assets? a. Patents and technical know-how b. Warranty and contingent claims c. Trademarks and customer lists d. Covenants not to compete and franchises e. Copyrights and software

B

17. Which of the following activities are likely to extend beyond what is normally considered the conclusion of the post-closing integration period? a. Developing communication plans b. Cultural integration c. Integration planning d. Developing staffing plans e. None of the above

B

5. Which of the following is generally not true about communication during the integration period? a. Communication should be as frequent as possible b. Employees should be sheltered from bad news c. The CEO of the combined firms should lead the effort to communicate to employees at all levels d. Regularly scheduled employee meetings are often the best way to communicate progress to plan e. The reasons for changing work practices and compensation must be thoroughly explained to employees

B

9. The tangible book value or equity per share method is applicable primarily to the following industries: a. Steel and financial services b. Distribution and financial services c. Electric and natural gas utilities d. Coal and copper mining e. Space and defense

B

12. Which of the following is not true about integrating business alliances? a. Teamwork is the underpinning that makes alliances work. b. Control is best exerted through coordination c. Decisions are made at the top of the organization d. Decisions are based on the premise that all participants to the alliance have had an opportunity to express their opinions. e. The failure of one party to meet commitments will erode trust

C

13. Which of the following is not generally considered a valuation method? a. Discounted cash flow method b. Comparable companies' method c. Share exchange ratio method d. Liquidation value method e. Comparable transaction's method

C

14 14. All of the following are true for market based valuation methods except for which of the following? a. Assumes that markets are efficient such that current values reflect all the information currently known about the business b. Current values represent what a willing buyer and seller are willing to pay for a business in the absence of full information c. Market based methods are always superior to discounted cash flow techniques d. Include comparable company and recent transactions methods e. Include the tangible book value approach

C

24. Key management integration team responsibilities include all of the following except for a. Building a master schedule of activities that need to be accomplished b. Establishing work teams c. Tracking the daily operation of the firms d. Monitoring and expediting key decisions e. Establishing a rigorous communications program

C

7. All of the following are generally considered stakeholders in the integration process except for a. Suppliers b. Employees c. Competitors d. Regulators e. Customers

C

Which one of the following factors is not considered calculating a firm's PEG ratio? a. Projected growth rate of the value indicator (e.g., earnings) b. Ratio of market price to value indicator (e.g., P/E) c. Share exchange ratio d. Historical growth rate of the value indicator e. None of the above

C

12 2. In determining the purchase price for an acquisition target, which one of the following valuation methods does not require the addition of a purchase price premium? a. Discounted cash flow method b. Comparable companies' method c. Comparable industries' method d. Recent transactions' method e. A & B only

D

13 8. Which of the following statements about the comparable companies' valuation method is not true? a. Requires the use of firms that are "substantially" similar to the target firm b. Uses market based rather than cash flow based valuations c. Often used as the basis of investment banker fairness opinions d. Generally provides the most accurate valuation method e. Provides an estimate of the target firm at a moment in time.

D

2. All of the following are often cited as factors critical to the ultimate success of the integration effort except for a. Plan carefully, act quickly b. The use of project management techniques c. Early communication from the top of the organization d. Salary and benefit reductions for many employees of the acquired company in order to realize cost savings e. Making the tough decisions as early as possible

D

3. Certain post integration issues are best addressed prior to the closing. These include all of the following except for a. Who will pay for employee severance expenses b. How will employee payroll be managed during ownership transition c. What will be done with checks from customers that the seller continues to receive after closing d. How will the seller be reimbursed for monies owed to suppliers for products sold prior to closing e. Who will pay for health care and disability claims that often arise just before a business is sold?

D

3. Limitations in applying the comparable companies' method of valuation include which of the following? a. Finding truly comparable companies is difficult b. The use of market-based methods can result in significant under- or overvaluation during periods of declining or rising stock markets c. Market-based methods can be manipulated easily, because the methods do not require a clear statement of assumptions with respect to risk, growth, or the timing or magnitude of future earnings and cash flows. d. A, B, & C e. A & B only

D

8. All of the following are generally true about creating new organizations except for a. Learn from prior organizational strengths and weaknesses b. Business needs should drive structure and not the reverse c. Centralized organizations facilitate the pace of the integration d. The structure employed during the integration must be the one used in the long-run e. Senior managers should be given responsibility for selecting their own subordinates

D

Rapid integration is usually important for all of the following reasons except for a. Minimizes employee turnover b. Improves the morale and productivity of current employees of both the acquiring and acquired firms c. Builds confidence in current employees in the competence of management d. Dispenses with the need for pre-integration planning e. Reduces customer turnover

D

10. Which of the following is not true about the liquidation/break-up valuation methods? a. Highly diversified companies are often valued in terms of the sum of the standalone values of their operating units b. The calculation of such values is heavily dependent on the skill of appraisers who are intimately familiar with the operations to be liquidated. c. Assets can sometimes be liquidated in an orderly fashion. d. Legal, appraisal, and consulting fees may comprise a substantial share of the total proceeds of the sale of the assets e. The liquidation value of most of the firm's assets is about the same.

E

11. Which of the following represent commonly used techniques for integrating corporate cultures? a. Employees are encouraged to share the same overall goals b. "Best practices" in one department are employed in other departments c. Multiple businesses share the same service such as the legal department d. Employees are co-located e. All of the above

E

13. Successfully integrated mergers and acquisitions are frequently those which a. Communicate candidly and continuously b. Appoint an integration manager and team with clearly defined goals and responsibilities c. Establish well defined lines of authority d. Focus on issues that have the greatest near-term impact e. All of the above

E

14. Post-closing integration may be viewed in terms of a process consisting of the following activities a. Integration planning b. Developing communication plans c. Creating a new organization d. Developing staffing plans e. All of the above

E

15. The acquirer's sales force sells very complex software solutions to its customers. The target firm manufactures commodity hardware products. Customers of the two firms sometimes buy both products. The benefits of integrating the sales force of both the acquirer and target firms includes all of the following except for a. Generates significant cost savings by eliminating duplicate sales representatives b. Eliminates related sales support expenses c. Minimizes potential customer confusion by enabling customers to deal with a single sales representative d. Facilitates communication of a consistent brand image e. Makes product cross-selling more effective

E

15. Which of the following are examples of intangible assets that may have value to the acquiring company? a. Patents b. Trade names c. Customer lists and relationships d. Covenants not to compete e. All of the above

E

16. The post-closing integration process consists of all of the following activities except for a. Integration planning b. Developing communication plans c. Creating a new organization d. Developing staffing plans e. Identifying the acquisition vehicle

E

18. Delay in integrating the acquired business contributes to which of the following? a. Employee anxiety b. Customer attrition c. Supplier anxiety d. Deteriorating employee productivity e. All of the above

E

19. Successfully integrated M&As are those that demonstrate leadership by candidly and continuously communicating which of the following? a. A clear vision b. A set of values c. Unambiguous priorities for each employee d. A & B only e. A, B, & C

E

20. Which of the following represent important decisions that must be made early in the integration process? a. Identifying the appropriate organizational structure b. Defining key reporting relationships c. Selecting the right managers d. Identifying and communicating key roles and responsibilities e. All of the above

E

21. Poorly executed integration often results in high employee turnover. The costs of such turnover include which of the following? a. Declining morale among those that remain b. Retraining costs c. Declining productivity d. Deteriorating customer service e. All of the above

E

22. Which of the following factors affect customer attrition that normally accompanies post-merger integration? a. Customer uncertainty about on-time delivery b. More aggressive pricing from competitors c. Deteriorating customer services d. Deteriorating product quality e. All of the above

E

25. When corporate cultures are substantially different, it may be appropriate to a. Integrate the businesses as rapidly as possible b. Leave the businesses separate indefinitely c. Initially leave the businesses separate but integrate at a later time d. A or B e. B or C

E

4. Which of the following represent options available to managers in making investment decisions? a. Delay initial investment b. Accelerate cumulative investment c. Abandon the investment at a later date d. A & B only e. A, B, & C

E

5. Which one of the following is not a commonly used method of valuing target firms? a. Discounted cash flow b. Comparable companies method c. Recent transactions method d. Asset oriented method e. Share exchange ratio method

E

6, Customer attrition following an acquisition is commonly related to uncertainty about a. On time product delivery b. Product quality c. Pricing and payment terms d. A and B only e. A, B, and C

E

7. Which of the following represent limitations of real options? a. Key assumptions often are very difficult to quantify, especially volatility b. Project delays may incur significant opportunity costs c. Options often are not independent; therefore, selecting one option may foreclose other options d. Often requires complex modeling e. All of the above

E

9. Developing staffing plans requires which of the following? a. Identifying personnel requirements b. Determining the availability of skilled employees to fill these requirements c. Developing compensation plans d. A and B only e. A, B, and C

E