IMT SOLVED ASSIGNMENTS AVAILABLE – FIN009 Test-1
ASSIGNMENT
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Question1
If a Company acquire a loss making entity, which of the following may be the most likely reason for the deal:
a. Depreciation Tax Shield
b. Setting off losses against profits
c. Tax Saving
d. All of the above
Question 2
In which of the following case the acquisition subsidiary cease to exist?
a. Forward Triangular Merger
b. Leveraged Buyout
c. Single firm recapitalization
d. Reverse Triangular Merger
Question 3
Cement division of X Ltd purchase the cement division of Y Ltd for Rs. 100 Crores. The payment of 100 Crores will be credited to the bank account of Y Ltd and not the shareholders. This is most likely a case of?
a. Asset purchase
b. Stock acquisition
c. Merger
d. Reverse Merger
Question 4
If an almost debt free entity acquires a heavily debt funded firm, the major motive behind this transaction could be:
a. Cost Saving
b. Leverage Benefits
c. Tax Saving
d. Increase borrowing power
Question 5
Which of the following is most likely correct in case of Status Quo method of valuation?
a.Value of Target = Discounted FCFF + Control Premium – Value of Synergy
b.Value of Target = Discounted FCFF-Control Premium – Value of Synergy
c. Value of Target = Discounted FCFF-Control Premium + Value of Synergy
d.Value of Target Discounted FCFF + Control Premium + Value of Synergy
Question 6
A public offer by one firm to directly buy the shares of another firm is called a…
a. Merger.
b.Consolidation
c. Tender offer.
d. Spinoff
Question 7
Which amongst the following structure is to be chosen if the acquirer doesn’t want the target to be a separate legal entity?
a.Asset purchase
b.Merger
c.Stock purchase
d.Leveraged Buyout
Question 8
An optimum deal structure considers the objectives of both the buyer and the seller entities. Which of the following is least likely an objective of the parties?
a. Control
b. Tax status
c. Risk
d. None of the above
Question 9
Suppose that the market price of Company P is Rs.40 per share and that of Company Q is Rs.20. If P offers one share of common stock for three shares of Q, the ratio of exchange of market prices would be.
a.0.667
b.2
c. 1.125
d.015
Question 10
Divestiture of the most profitable division is called______ defensive strategy:
a.White Knight
b.Polson Pill
c. Crown Jewell
d. Golden Parachutes
Question 11
Empirical Results depicts that most of the mergers results into_____ in acquirer shareholder’s wealth:
a. Increase
b. Decrease
c. No change
d. Marginal decrease
Question 12
Vertical mergers are those in which the participants are
a.in the same industry.
b.in different industries
c. In different phases of the value chain.
d. none of the above.
Question 13
When a large Public Ltd. firm merges with a private entity then such a transaction is categorized as:
a. Slump Sale
b. Reverse Merger
c. Takeover
d.Leverage Buyout
Question 14
……………..the acquirer is sure about benefits of deal and doesn’t want to share that with target shareholders, he would most likely end up choosing which amongst the following type of payment?
a.Earn outs
b.Cash
c.Stock
d.None of the above
Question 15
If market capitalization of acquirer and target is Rs 1000 Cr and Rs 800 Cr respectively, calculate their weights for combining the performance measures of merging entities?
a.1000 and 800
b.10/8 and 8/10
c. 10 and 8
d.10/18 and 8/18
Question 16
The merger of Sunpharma and Ranbaxy is an example of
a.Cross-border merger
b.Horizontal merger
c. Conglomerate merger
d.Vertical merger
Question 17
Firm A is planning to acquire Firm B. If Firm A prefers to make a cash offer for the merger it indicates that
a. Firm A’s managers are optimistic about the post merger value of A
b. Firm A’s managers are pessimistic about the post merger value of A
c. Firm A’s managers are neutral about the post merger value of A
d. None of the above
Question 18
As per the Companies Act 2013, which of the following is the regulatory authority for the approval of scheme of merger.
a.High Courts
b.Ministry of Finance
c. ONCLT
d.SEBI
Question 19
The cost of Equity for a firm given a risk free rate of 7%, Market return 12% and 1.5 times the beta, is closest to:
a.0.105
b.0.125
c. 0.145
d.0.15
Question 20
The target contacts the friendly organization to get acquired by it, so that hostile raider is thwarted away, as per which of the following defensive strategy
a. White Knight
b. Poison Pill
c. Crown Jewell
d.Golden Parachutes
Question 21
The process of intensive investigation of each business activity like operations, finances etc. is called:
a. Due-Diligence
b. Non-Disclosure agreement
c. Letter of Intent
d. Definitive agreement
Question 22
A proposed acquisition may create synergy by:. 1. Increasing the market power of the combined firm. II. Improving the distribution network of the acquiring firm. III Providing the combined firm with a strategic advantage. IV. Reducing the utilization of the acquiring firm’s assets.
a. I and III only
b. II and III only
c. I and IV only
d.I, II, and III only
Question 23
In which of the following methods for M&A accounting, the identity of reserves will be preserved
a. Purchase Method
b. Pooling of Interest Method
c. Both of the above
d. None of the above
Question 24
Which amongst the following structure is most typically like a business decision which doesn’t require the shareholder approval at all?
a. Asset purchase
b. Merger
c. Stock purchase
d. LBOS
Question 25
Which amongst the following is least likely the benchmark used in case of comparable company analysis method of valuation
a. Industry Average/Median
b. Peer Group average/Median
c. Risk free Rate
d. Index Ratio
Question 26
If acquirer receives the large depreciation tax shield as a result of acquisition, this will lead to
a. Value creation
b. Value Destruction
c. Value Neutral
d. None of the above
Question 27
Which amongst the following is least likely the method of payment that should be chosen if the deal structure doesn’t want to impart tax liability on the target shareholders:
a. Cash
b. Debt
c. Stock
d.Earn outs
Question 28
Sale of a business division to outsiders is known as:
a.Spin-off
b.Spilt-off
c. Divestiture
d.Split-up
Question 29
Higher third party approvals are required in which of the following case?
a. Asset purchase
b. Merger
c. Stock Purchase
d. LBOS
Question 30
Which of the following are commonly cited reasons for M&As?
a. Synergy
b. Market power
c. Strategic realignment
d. All of the above