Corporate Finance-FIN622
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1. A firm wants to acquire another firm by purchasing its assets. Which of the following
method could the firm use to evaluate the financial aspects of this deal?
a. Breakup value method
b. Dividend valuation method
c. Present value method
d. Price earning ratio method
2. Which of the following is a major limitation of an income based method of share
valuation?
a. Future growth assumptions
b. Estimation of future cash flows
c. Future cash flow valuation
d. Future cash flow discounting
3. All of the following are related to an income based method of shares valuation
EXCEPT?
a. Future cash flows
b. Future growth
c. Discount rate
d. Book values
4. Which of the following statement applies to employees' buyout?
a. Employees are promoted to the higher positions
b. Employees are given more responsibilities
c. Employees buy majority shares in the firm
d. Employees buy shares of a competing firm
5. Management of a firm prefers buyout because of the following reason?
a. The company is selling at below the market price
b. The company has good future prospects
c. Company offers good product
d. Company's management could change
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a. The acquired firm would have a high interest expense
b. The acquired firm would have a high operating cost
c. The acquired firm would have a high manufacturing cost
d. The acquired firm would have a high operating risk
7. In which of the following acquisition strategy, a purchaser has complete knowledge
of the acquiring firm?
a. Management Buy-In
b. Management buyout
c. Consolidation
d. Amalgamation
8. Which of the following would be an example of an MBO?
a. Management of a firm-A purchases majority shares from the shareholders
b. Management of a firm-A acquires majority shares in another firm-B
c. Management sale out some assets of the firm
d. Management buy some new plants and machinery
9. All of the following could be an outcome of financial distress of a firm EXCEPT?
a. Employees are leaving the firm
b. Suppliers refuse to supply on credit
c. Banks do not provide loans
d. Financial markets become instable
10. Choose the correct statement?
a. The price at which a FX dealer will sell a variable currency is called offer price
b. The price at which an FX dealer will buy the base currency is called bid price
c. The price at which an FX dealer will sell a variable currency is called bid price
d. The price at which an FX dealer will sell a base currency is called bid price
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