Fall 2010 FIN 351 Quiz 2
1. If In and Out Burger, a maker of fast food, were to acquire Carl’s Jr., a maker of fast food, the merger would
A. a conglomerate.
B. a divestiture.
2. If Apple was to merge with Toyota, the merger would be:
A. horizontal merger.
B. conglomerate merger.
C. vertical merger.
D. a spin-off by the national homebuilding firm.
3. Payout Corp announces a five to four stock split. They current have 100,000 shares outstanding. How many
shares outstanding exist after the stock split?
4. What happens to the price of a stock on ex-dividend day?
A. Price falls in the amount of the dividend.
B. Price increase in the amount of the dividend.
5. Company X has 0 debt, a tax rate of 35%, $30,000 of operating cash flows, and wants to issue $500,000 of debt
at a 10% interest rate. The discount rate is 12%. What is the present value of the tax shield?
6. The current assets of Firm A are $4,000 and the current liabilities are $2,000 for the most recent year. Last year,
Firm A had $2,200 of current assets and $1,000 of current liabilities. Calculate the current ratio for the most
current year. Has it improved from last year?
A. 2.2, yes
B. 2.2, no
C. 2.0, yes
D. 2.0, no