Chapter 34 Quiz, Control, Governance, and Financial Architecture
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
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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