FNAN 522 FINAL EXAM PAPER 2025/2026 QUESTIONS
WITH ANSWERS GRADED A+
✔✔a ski equipment store merging with a tennis equipment store is an example of
improving operating through what? - ✔✔complementary resources
✔✔t/f
in general, if the buying firm offers the selling firm cash for its equity, then it will be
classified as a tax-free acquisition - ✔✔false
it will be a taxable acquisition
✔✔increased revenues form a merger can come from what? - ✔✔- marketing gains
- strategic benefits
- market power
✔✔a reduction in the total level of inventory after a merger is an example of a reduction
of __________ capital - ✔✔working
✔✔when the assets, liabilities, and any non-controlling interest of an acquired firm are
required to be reporting at their fair market value, which method is being used? - ✔✔the
purchase accounting method
✔✔if an acquisition does not create value, then the _________ - ✔✔earnings per share
may increase by the stock price of the acquiring firm may remain the same or decline
✔✔inventory is an example of what kind of capital? - ✔✔working
✔✔equipment and buildings are examples of what kind of capital? - ✔✔fixed
✔✔what risk will not be eliminated by mergers? - ✔✔systematic risk
✔✔the NPV of a merger = - ✔✔the total value of the acquired firm - the cost of the
acquisition to the bidder
✔✔the cost of a stock-for-stock acquisition is __________ a cash-for-stick acquisition -
✔✔greater than
✔✔when an individual adds securities to their portfolio that are less than perfectly
positively correlated, they benefit from what? - ✔✔diversification
✔✔the articles of incorporation and corporate bylaws governing a firm make up the
what? - ✔✔corporate charter
, ✔✔costs are generally higher in a stock acquisition because the acquiring firm's
shareholders must __________ - ✔✔share the acquisition gains with the target firm's
shareholders
✔✔acquisition by __________ is generally tax-free - ✔✔exchanging stock
✔✔acquisition by __________ usually results in a taxable transaction - ✔✔paying cash
✔✔frequent managerial resistance to a takeover attempt may include which tactics? -
✔✔- solicitation of competing bids
- press releases
- mailings to shareholders
✔✔a change in the corporate charter increasing the required percentage of shareholder
votes necessary to approve a merger is referred to as a ________ - ✔✔super majority
amendment
✔✔a going-private transaction where the outstanding shares of stock are purchased
largely with borrowed money is referred to as a __________ - ✔✔leveraged buyout
✔✔a standstill agreement is an ____________ - ✔✔agreement made by the acquiring
firm to limit its holdings in the target firm
✔✔the strategy of creating a generous severance package for a firm's top management
in defense of a takeover is referred to as a _________ - ✔✔golden parachute
✔✔which tactics, designed to deter a hostile takeover, are instituted prior to any
takeover attempt? - ✔✔- a poison pill
- a golden parachute
✔✔from the stockholder's viewpoint, a ______ is a takeover because the shareholders
are bought out - ✔✔LBO (leveraged buyout)
✔✔historically, how have mergers affected the stockholders? - ✔✔mergers have
benefitted the target's stockholders
✔✔the most basic type of divestiture is the _______ of a division - ✔✔sale
✔✔when a firm avoids a hostile acquisition by turning a friendly bidder, that friendly
bidder is referred to as what? - ✔✔a white knight
✔✔shareholders in bidder firms on average __________ from a takeover - ✔✔neither
win nor lose
WITH ANSWERS GRADED A+
✔✔a ski equipment store merging with a tennis equipment store is an example of
improving operating through what? - ✔✔complementary resources
✔✔t/f
in general, if the buying firm offers the selling firm cash for its equity, then it will be
classified as a tax-free acquisition - ✔✔false
it will be a taxable acquisition
✔✔increased revenues form a merger can come from what? - ✔✔- marketing gains
- strategic benefits
- market power
✔✔a reduction in the total level of inventory after a merger is an example of a reduction
of __________ capital - ✔✔working
✔✔when the assets, liabilities, and any non-controlling interest of an acquired firm are
required to be reporting at their fair market value, which method is being used? - ✔✔the
purchase accounting method
✔✔if an acquisition does not create value, then the _________ - ✔✔earnings per share
may increase by the stock price of the acquiring firm may remain the same or decline
✔✔inventory is an example of what kind of capital? - ✔✔working
✔✔equipment and buildings are examples of what kind of capital? - ✔✔fixed
✔✔what risk will not be eliminated by mergers? - ✔✔systematic risk
✔✔the NPV of a merger = - ✔✔the total value of the acquired firm - the cost of the
acquisition to the bidder
✔✔the cost of a stock-for-stock acquisition is __________ a cash-for-stick acquisition -
✔✔greater than
✔✔when an individual adds securities to their portfolio that are less than perfectly
positively correlated, they benefit from what? - ✔✔diversification
✔✔the articles of incorporation and corporate bylaws governing a firm make up the
what? - ✔✔corporate charter
, ✔✔costs are generally higher in a stock acquisition because the acquiring firm's
shareholders must __________ - ✔✔share the acquisition gains with the target firm's
shareholders
✔✔acquisition by __________ is generally tax-free - ✔✔exchanging stock
✔✔acquisition by __________ usually results in a taxable transaction - ✔✔paying cash
✔✔frequent managerial resistance to a takeover attempt may include which tactics? -
✔✔- solicitation of competing bids
- press releases
- mailings to shareholders
✔✔a change in the corporate charter increasing the required percentage of shareholder
votes necessary to approve a merger is referred to as a ________ - ✔✔super majority
amendment
✔✔a going-private transaction where the outstanding shares of stock are purchased
largely with borrowed money is referred to as a __________ - ✔✔leveraged buyout
✔✔a standstill agreement is an ____________ - ✔✔agreement made by the acquiring
firm to limit its holdings in the target firm
✔✔the strategy of creating a generous severance package for a firm's top management
in defense of a takeover is referred to as a _________ - ✔✔golden parachute
✔✔which tactics, designed to deter a hostile takeover, are instituted prior to any
takeover attempt? - ✔✔- a poison pill
- a golden parachute
✔✔from the stockholder's viewpoint, a ______ is a takeover because the shareholders
are bought out - ✔✔LBO (leveraged buyout)
✔✔historically, how have mergers affected the stockholders? - ✔✔mergers have
benefitted the target's stockholders
✔✔the most basic type of divestiture is the _______ of a division - ✔✔sale
✔✔when a firm avoids a hostile acquisition by turning a friendly bidder, that friendly
bidder is referred to as what? - ✔✔a white knight
✔✔shareholders in bidder firms on average __________ from a takeover - ✔✔neither
win nor lose
