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Multiple Choice Quiz
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1

The following are examples of changes in corporate control except:
A)Mergers and acquisition
B)LBOs
C)Proxy fights
D)Spin-offs and carve-outs
2

Leveraged buyouts (LBOs) almost always involve:
A)AAA grade debt
B)Issuance of new shares of stock to many investors
C)The existing management team as new shareholders
D)Junk grade debt
E)All of the above
3

Which of the following tactics completely eliminates the possibility of a takeover via tender offer?
A)Leveraged buyout (LBO)
B)Exclusionary self-tender
C)Targeted repurchase
D)Super majority amendment
E)None of the above
4

Big gainers from LBOs were:
A)Junk bond holders
B)Raiders
C)Selling stockholders
D)Investment banking firms
5

Junk bonds are bonds with:
A)AAA or Aaa ratings
B)BBB or Baa ratings
C)BB or Ba ratings or lower
D)D rated bonds
6

In case of spin-offs:
A)Shares of the new company are given to shareholders of the parent company
B)Shares of the new company are sold as a public offering
C)Shares of the new company are bought by borrowing or issuing junk bonds
D)None of the above
7

In case of carve-outs:
A)Shares of the new company are given to the shareholders of the parent company
B)Shares of the new company are sold in a public offering
C)Shares of the new company are bought by borrowing or issuing junk bonds
D)None of the above
8

Which of the following statements regarding spin-offs and carve-outs is not true?
A)Spin-offs are not taxed if the shareholders of the parent company are given a majority of shares in the new company
B)Spin-offs are not taxed if the shareholders of the parent company are given at least 80% of the shares in the new company
C)Gains or losses from carve-outs are taxed at the corporate tax rate
D)None of the above
9

A privatization is a:
A)Sale of a government-owned company to private investors
B)Sale of private companies to the government
C)Sale of a publicly traded company to private investors
D)None of the above
10

The following are important motives for privatization except:
A)Revenue for the government
B)Increased efficiency
C)Share ownership
D)Economies of scale
11

Mergers and acquisitions in unrelated industries are called:
A)Horizontal mergers
B)Vertical mergers
C)Conglomerate mergers
D)Privatization
12

The costs of resolving the conflicts of interest among the stakeholders in a firm are called:
A)Agency costs
B)Legal costs
C)Bankruptcy costs
D)Administrative costs
13

"Effective" control of a firm requires approximately:
A)100% ownership
B)51% ownership
C)50% ownership
D)20% ownership
14

Spin-offs are not taxed as long as shareholders of the parent company are given at least 80% of the shares in the new company.
A)True
B)False
15

A keiretsu is a network of companies organized around a major bank.
A)True
B)False





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