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Flashcards in Chp6-Quiz Deck (10):
1

***Book value is based on historical cost.

TRUE

2

Company A has unused production capacity and makes a product similar to Company B. Company B acquires Company A to obtain the unused production capacity. This is an example of:

Horizontal Integration

3

***Which of the following valuation methods usually results in the lowest value for the target firm?

Book value

4

The acquirer begins the negotiation with:

1) The maximum price it can pay without post-merger earnings per share dilution, and 2) The present value of the target's enhanced cash flows

5

Company A has unused debt capacity. Company B acquires Company A to enhance:

Financing capability

6

Which of the following items would have the greatest impact on the book value of the firm?

Depreciation of the assets

7

The target firm determines its liquidation value and the present value of its relevant stand alone cash flows and selects the higher value. This is the target's:

Minimum acceptable price

8

The appropriate discount rate to use in discounting the cash flow of the target is

The target's cost of equity

9

***Discounting the terminal value of the target involves a discount rate that is

The target's cost of equity

10

There is a difference between cash flow and operating cash flow.

TRUE