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Multiple Choice
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1

Which of the following is NOT a potential benefit of merger?
A)Synergy
B)Portfolio Effect
C)Dilution of EPS
D)tax loss carry forward
2

A business combination where the two firms who are merging develop a new firm is called:
A)a horizontal merger
B)a vertical merger
C)a business consolidation
D)none of the above
3

The price that an acquiring company must pay for the acquired company is:
A)book value
B)market value
C)a higher price than market value
D)none of the above
4

The typical merger premium is:
A)20%
B)20-40%
C)40-60%
D)none of the above
5

Merging with an unrelated company is called a ___________ merger.
A)conglomerate
B)horizontal
C)vertical
D)none of the above
6

A business combination where the resulting firm maintains the identity of the acquiring firm is called a:
A)conglomerate
B)merger
C)consolidation
D)none of the above
7

Which of the following is a tender offer that uses debt to buy the firm?
A)hostile takeover
B)negotiated merger
C)two-step buyout
D)leveraged buyout
8

The financial motives for merger include all of the following except:
A)the portfolio effect
B)improved access to the capital markets
C)tax loss carry forwards
D)synergy
9

The elimination of overlapping functions and the meshing of two firms' strong areas creates the managerial incentive for merger that is called:
A)pooling of interest
B)purchase of assets
C)synergy
D)None of the above
10

Which of the following kinds of mergers lead to diversification benefits?
A)vertical
B)conglomerate
C)horizontal
D)none of the above





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