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Question
In the presence of taxes, firms are often less leveraged than they should be, given the potentially large tax benefits associated with debt. Firms can increase market value by increasing leverage to the point at which the additional contribution of the tax shield to the firm's market value begins to decline. True or False
Answer
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Acquiring companies often find themselves with certain assets and operations of the acquired company that do not fit their primary strategy. Such assets may be divested to fund future investments. True of False
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Management may sell assets to fund diversification opportunities? True or False
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Both a divestiture and a spin-off generally generate a cash infusion for the parent. True or False
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In deciding to sell a business, a parent firm should compare the business after-tax value in sale with its pre-tax value to the parent as part of the parent.
True or False
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A joint venture is rarely an independent legal entity such as a corporation or partnership.
True or False
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Give examples of how the partners objectives differ.
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Which of the following is true about integration planning? Without integration planning, integration is not likely to
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c. Proceed without significant disruption to the acquirers operations
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e. All of the above
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Which of the following is not typically true of post-closing evaluation of an acquisition?
a. It is important not to change the performance benchmarks against which the acquisition is measured
b. It is critical to ask the tough questions
c. It is an opportunity to learn from mistakes
d. It is commonly done
e. It is frequently avoided by acquiring firms because of the potential for embarrassment.