Q25 - University of Houston-Victoria FIN 6352 Financial...

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FIN 6352 Financial Management FMQuiz25 Dr. Xavier Garza Gómez University of Houston-Victoria FIN 6352 Financial Management Review Quiz for Chapter 25 - Mergers, LBOs, Divestitures, and Holding Companies True-False 1. Synergistic merger effects can arise from a number of different sources including operating economies of scale, financial economies, and increased managerial efficiency. a. True b. False 2. A spin-off is a type of divestiture in which the assets of a division are sold to another firm. a. True b. False 3. The two principal advantages of holding companies are (1) that the holding company can control a great deal of assets with limited equity and (2) that the dividends received by the parent from the subsidiary are not taxed if the parent holds at least 50 percent of the subsidiary's stock. a. True b. False Multiple Choice: Concepts 4. Which of the following are given as reasons for the high level of merger activity in the U.S. during the 1980s? a. Synergistic benefits arising from mergers. b. Reduction in competition resulting from mergers. c. Attempts to stabilize earnings by diversifying. d. All of the above. e. Both a and c above. 5. Which of the following statements is most correct? a. A firm acquiring another firm in a horizontal merger will not have its required rate of return affected because the two firms will have similar betas. b. Financial theory says that the choice of how to pay for a merger is really irrelevant because, although it may affect the firm's capital structure, it will not affect the firm's overall required rate of return.
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This note was uploaded on 11/23/2008 for the course FIN 6352 taught by Professor Gomez during the Spring '08 term at TAMU Intl..

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Q25 - University of Houston-Victoria FIN 6352 Financial...

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