1 Synergy is said to take place when the merged companies ar

1. Synergy is said to take place when the merged companies are greater than the individual companies working separately. (True or False)

2.The potential of a tax loss carryforward has no effect when considering the acquisition of a company. (True or False)

3. The rising ratio of divestitures to new acquisitions that occurred in the past suggests that

A. poison pills are no longer effective as a defense against takeovers.

B. too much diversification strained the operating capabilities of many firms.

C. the portfolio effect has been a highly successful method of reducing risk.

D. multinational firms are increasingly considered high risky investments.

4. In regard to two-step buyouts,

A. the SEC highly approves of them.

B. the FTC highly approves of them.

C. the SEC is keeping a close eye on them.

D. the FTC is keeping a close eye on them.

5.Selling stockholders who are offered cash or another company\'s stock in a merger may be willing to part with the shares because

A. the offered shares may be more marketable.

B. the price they are offered may be above market value.

C. they can attain a greater degree of diversification as a result.

D. all of these options are true.

6. The Prada Corporation is considering a merger with the Stone Company, which has 500,000 outstanding shares selling for $30. An investment banker has advised that to succeed in its merger, Prada Corp. would have to offer $45 per share for Stone\'s stock. Currently, Prada Corp. stock is selling for $25. How many shares of Prada Corp. stock would have to be exchanged to acquire all of Stone Company’s stock?

A. 266,667

B. 600,000

C. 900,000

D. 20,000

7. Eurobond issues are sold simultaneously in several national capital markets, but denominated in a currency different from that of the nation in which the bonds are issued. (True or False)

8.One motivation to merge is through tax savings. (True or False)

9. A derivative is a financial instrument whose value is determined by

A.a regulatory body such as the SEC.

B. an underlying security.

C. futures and options.

D. None of these options are correct.

10. A reverse stock split

A. occurs when a company wants to increase the price of its common stock because the market hasn\'t recognized the improvements the company has made in achieving profitability.

B. means the company exchanges fewer new shares in place of more older shares.

C. eliminates any previous stock dividend.

D. is more popular in bull markets than in bear markets.

Solution

1)

Synergies are in the form of cost savings to due increase in efficiency or increase in revenues arisen to the merged company as a result of increase in effectiveness and streamlines of operations and higher skilled labor.

Hence, given statement is True.