FIN 302 Final Exam

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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


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