Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Banking
Q:
Public announcements of a proposed takeover are often designed to put pressure on the board of the target firm. True or False
Q:
A successful proxy fight may represent a far less expensive means of gaining control over a target than a
tender offer. True or False
Q:
When the growth rate of the money supply is increased, interest rates will rise immediately if the liquidity effect is ________ than the other effects and if there is ________ adjustment of expected inflation.
A) larger; rapid
B) larger; slow
C) smaller; slow
D) smaller; rapid
Q:
When the growth rate of the money supply is decreased, interest rates will rise immediately if the liquidity effect is ________ than the other effects and if there is ________ adjustment of expected inflation.
A) larger; rapid
B) larger; slow
C) smaller; slow
D) smaller; rapid
Q:
The accumulation of a target firms stock by arbitrageurs makes purchases of blocks of stock by the bidder easier. True or False
Q:
When the growth rate of the money supply decreases, interest rates end up being permanently lower if
A) the liquidity effect is larger than the other effects.
B) there is fast adjustment of expected inflation.
C) there is slow adjustment of expected inflation.
D) the expected inflation effect is larger than the liquidity effect.
Q:
An astute bidder should always analyze the target firms possible defenses such as golden parachutes for key employees and poison pills before making a bid. True or False
Q:
When the growth rate of the money supply increases, interest rates end up being permanently lower if
A) the liquidity effect is larger than the other effects.
B) there is fast adjustment of expected inflation.
C) there is slow adjustment of expected inflation.
D) the expected inflation effect is larger than the liquidity effect.
Q:
Concern about their fiduciary responsibility to shareholders and shareholder lawsuits often puts pressure on a target firms board of directors to accept an offer if it includes a significant premium to the targets current share price. True or False
Q:
If the liquidity effect is smaller than the other effects, and the adjustment of expected inflation is slow, then the
A) interest rate will fall.
B) interest rate will rise.
C) interest rate will initially fall but eventually climb above the initial level in response to an increase in money growth.
D) interest rate will initially rise but eventually fall below the initial level in response to an increase in money growth.
Q:
Friendly takeovers are negotiated settlements that are often characterized by bargaining, which remains undisclosed until the agreement has been signed. True or False
Q:
Figure 4.3In Figure 4.3, an increase in the interest rate from i2 to i1 can be explained byA) a decrease in money growth.B) an increase in money growth.C) a decline in the price level.D) an increase in the expected price level.
Q:
Was AMPs Board and management acting to protect their own positions (i.e., the Management Entrenchment Hypothesis) or in the best interests of the shareholders (i.e., the Shareholder Interests Hypothesis)?
Q:
Figure 4.3In Figure 4.3, the decrease in the interest rate from i1 to i2 can be explained byA) a decrease in money growth.B) an increase in money growth.C) a decline in the expected price level.D) only A and B of the above.
Q:
Should state laws be used to protect companies from hostile takeovers?
Q:
Figure 4.3In Figure 4.3, the factor responsible for the decline in the interest rate isA) a decline in the price level.B) a decline in income.C) an increase in the money supply.D) a decline in the expected inflation rate.
Q:
How did both AMP and AlliedSignal use litigation in this takeover battle?
Q:
Holding everything else constant, a decrease in the money supply causes
A) interest rates to decline initially.
B) interest rates to increase initially.
C) bond prices to increase initially.
D) both A and C of the above.
E) both B and C of the above.
Q:
Holding everything else constant, an increase in the money supply causes
A) interest rates to decline initially.
B) interest rates to increase initially.
C) bond prices to decline initially.
D) both A and C of the above.
E) both B and C of the above.
Q:
What other takeover defenses did AMP employ in its attempt to thwart AlliedSignal?
Q:
A decline in the expected inflation rate causes the demand for money to ________ and the demand curve to shift to the ________
A) decrease; right.
B) decrease; left.
C) increase; right.
D) increase; left.
Q:
Why did AlliedSignal, after announcing it had purchased 20 million AMP shares at $44.50, indicate that it would reduce the price paid in any further offers it might make?
Q:
A decline in the price level causes the demand for money to ________ and the demand curve to shift to the ________
A) decrease; right.
B) decrease; left.
C) increase; right.
D) increase; left.
Q:
What options did AlliedSignal have to neutralize or circumvent AMPs use of the Rights Agreement?
Q:
A rise in the price level causes the demand for money to ________ and the demand curve to shift to the ________
A) decrease; right.
B) decrease; left.
C) increase; right.
D) increase; left.
Q:
How did the AMP Board use the AMP Rights Agreement to encourage AMP shareholders to vote against AlliedSignals proposals?
Q:
A lower level of income causes the demand for money to ________ and the interest rate to ________
A) decrease; decrease.
B) decrease; increase.
C) increase; decrease.
D) increase; increase.
Q:
What anti-takeover defenses were in place at AMP prior to AlliedSignals offer?
Q:
A higher level of income causes the demand for money to ________ and the interest rate to ________
A) decrease; decrease.
B) decrease; increase.
C) increase; decrease.
D) increase; increase.
Q:
What steps did AlliedSignal take to satisfy federal securities laws?
Q:
What types of takeover tactics did AlliedSignal employ?.
Q:
When comparing the loanable funds and liquidity preference frameworks of interest rate determination, which of the following is true?
A) The liquidity preference framework is easier to use when analyzing the effects of changes in expected inflation.
B) The loanable funds framework provides a simpler analysis of the effects of changes in income, the price level, and the supply of money.
C) In most instances, the two approaches to interest rate determination yield the same predictions.
D) All of the above are true.
E) Only A and B of the above are true.
Q:
In an effort to combat the proxy contest initiated by the Hewlett and Packard families against the merger, HPs board and management took their case to the shareholders in a costly battle paid for by HP funds (i.e., HP shareholders). Do you think it is fair that HPs management can finance their own proxy contest using company funds while dissident shareholders must finance their effort using their own funds.
Q:
The loanable funds framework is easier to use when analyzing the effects of changes in ________, while the liquidity preference framework provides a simpler analysis of the effects from changes in income, the price level, and the supply of ________
A) expected inflation; bonds.
B) expected inflation; money.
C) government budget deficits; bonds.
D) the supply of money; bonds.
Q:
In view of the dramatic decline in HPs stock following the announcement, why do you believe Compaq shareholders would still vote to approve the merger?
Q:
In his liquidity preference framework, Keynes assumed that money has a zero rate of return; thus, when interest rates ________ the expected return on money falls relative to the expected return on bonds, causing the demand for money to ________.
A) rise; fall
B) rise; rise
C) fall; fall
D) fall; rise
Q:
What is a standstill agreement and why might it have been included as a condition for the Pfizer-Warner Lambert Lipitor distribution arrangement? How did the standstill agreement affect Pfizers effort to merge with Warner Lambert? Why would Warner Lambert want a standstill agreement?
Q:
In Keynes's liquidity preference framework, individuals are assumed to hold their wealth in two forms:
A) real assets and financial assets.
B) stocks and bonds.
C) money and bonds.
D) money and gold.
Q:
What factors may make it difficult for this merger to meet or exceed industry average returns? What are the implications for the long-term financial performance of the new firm of only using Pfizer stock to purchase Warner Lambert shares?
Q:
Figure 4.2In Figure 4.2, one possible explanation for a decrease in the interest rate from i2 to i1 isA) an increase in government budget deficits.B) an increase in expected inflation.C) a decrease in economic growth.D) a decrease in the riskiness of bonds relative to other investments.
Q:
What factors may have contributed to Warner Lamberts rejection of the Pfizer proposal?
Q:
Figure 4.2In Figure 4.2, one possible explanation for the increase in the interest rate from i1 to i2 isA) an increase in economic growth.B) an increase in government budget deficits.C) a decrease in government budget deficits.D) a decrease in economic growth.E) a decrease in the riskiness of bonds relative to other investments.
Q:
What other defenses do you think Warner could or should have employed? Comment on the effectiveness of each alternative defense you suggest Warner could have employed?
Q:
When the economy enters into a boom, normally the demand for bonds ________,
the supply of bonds ________, and the interest rate ________.
A) increases; increases; rises
B) decreases; decreases; falls
C) increases; decreases; rises
D) decreases; increases; rises
Q:
What takeover defenses did Warner employ to ward off the Pfizer merger proposal? What tactics
did Pfizer employ to overcome these defenses? Comment on the effectiveness of these defenses.
Q:
When the economy slips into a recession, normally the demand for bonds ________, the supply of bonds ________, and the interest rate ________.
A) increases; increases; rises
B) decreases; decreases; falls
C) increases; decreases; falls
D) decreases; increases; rises
Q:
In your judgment, why was Alcoa able to complete the transaction by offering such a small premium over Reynolds share price at the time the takeover was proposed?
Q:
A decrease in the expected rate of inflation causes the demand for bonds to ________ and the supply of bonds to ________.
A) fall; fall
B) fall; rise
C) rise; fall
D) rise; rise
Q:
Why do you believe Reynolds management rejected Alcoas initial bid as inadequate?
Q:
An increase in the expected rate of inflation causes the demand for bonds to ________ and the supply for bonds to ________.
A) fall; fall
B) fall; rise
C) rise; fall
D) rise; rise
Q:
Describe the various takeover tactics Alcoa employed in its successful takeover of Reynolds. Why were these tactics employed?
Q:
The economist Irving Fisher, after whom the Fisher effect is named, explained why interest rates ________ as the expected rate of inflation ________.
A) rise; increases
B) rise; stabilizes
C) rise; decreases
D) fall; increases
E) fall; stabilizes
Q:
What was the dollar value of the purchase price Alcoa offered to pay for Reynolds?
Q:
Factors that can cause the supply curve for bonds to shift to the left include
A) an expansion in overall economic activity.
B) a decrease in expected inflation.
C) an increase in government deficits.
D) only A and C of the above.
Q:
After initially jumping, PeopleSofts share price dropped to about $22 per share, well below Oracles sweetened offer. When does this tell you about investors expectations about the deal. Why do you believe investors felt the way they did? Be specific.
Q:
Factors that can cause the supply curve for bonds to shift to the right include
A) an expansion in overall economic activity.
B) a decrease in expected inflation.
C) a decrease in government deficits.
D) all of the above.
E) only A and B of the above.
Q:
Identify at least one takeover defense or tactic that is in place or is being employed by PeopleSoft. Explain how this defense or tactic is intended to discourage Oracle in its takeover effort.
Q:
Figure 4.1In Figure 4.1, the most likely cause of a decrease in the equilibrium interest rate from i2 to i1 isA) an increase in the expected inflation rate.B) a decrease in the expected inflation rate.C) a business cycle expansion.D) a combination of both A and C of the above.
Q:
Identify at least one takeover tactic being employed by Oracle in its attempt to acquire PeopleSoft. Explain how this takeover tactic(s) works.
Q:
Figure 4.1In Figure 4.1, the most likely cause of the increase in the equilibrium interest rate from i1 to i2 is a(n) ________ in the ________.A) increase; expected inflation rateB) decrease; expected inflation rateC) increase; government budget deficitD) decrease; government budget deficit
Q:
Explain why PeopleSofts management may have rejected Oracles improved offer of $26 per share and why this rejection might have been in the best interests of the PeopleSoft shareholders? What may have PeopleSofts management been expecting to happen (Hint: Consider the various post-offer antitakeover defenses that could be put in place)?
Q:
InBev agreed to name the new company Anheuser-Busch InBev, keep Budwieser brand, maintain headquarters in St. Lous, and not to close any of the firms 12 breweries in North America. How might these decisions impact InBevs ability to realize projected cost savings?
Q:
When the inflation rate is expected to increase, the real cost of borrowing declines at any given interest rate; as a result, the ________ bonds increases and the ________ curve shifts to the right.
A) demand for; demand
B) demand for; supply
C) supply of; demand
D) supply of; supply
Q:
InBev launched a proxy contest to take control of the Anheuser-Busch Board and includes a Busch family member on its slate of candidates. The firm also raised its bid from $65 to $40 and agreed to fully document its loan commitments. Explain how each of these actions helped complete the transaction?
Q:
When the inflation rate is expected to increase, the expected return on bonds relative to real assets falls for any given interest rate; as a result, the ________ bonds falls and the ________ curve shifts to the left.
A) demand for; demand
B) demand for; supply
C) supply of; demand
D) supply of; supply
Q:
What is a friendly takeover? Speculate as to why it may have turned hostile?
Q:
Why would the annual cost savings not be realized until the end of the third year?
Q:
When the federal government's budget deficit decreases, the ________ curve for bonds shifts to the ________.
A) demand; right
B) demand; left
C) supply; left
D) supply; right
Q:
When the federal government's budget deficit increases, the ________ curve for bonds shifts to the ________.
A) demand; right
B) demand; left
C) supply; left
D) supply; right
Q:
Why would rising commodity prices spark industry consolidation?
Q:
Kraft appeared to take action immediately following Cadburys spin-off of Schweppes making Cadbury a pure candy company. Why do you believe that Kraft chose not to buy Cadbury and later divest such noncore businesses as Schweppes?
Q:
An increase in expected inflation causes the supply of bonds to ________ and the supply curve to shift to the ________.
A) increase, left
B) increase, right
C) decrease, left
D) decrease, right
Q:
After four months of bitter and often public disagreement, Cadburys and Krafts management reached a final agreement in a weekend. What factors do you believe might have contributed to this rapid conclusion?
Q:
During a recession, the supply of bonds ________ and the supply curve shifts to the ________.
A) increases, left
B) increases, right
C) decreases, left
D) decreases, right
Q:
Why did the price of other food manufacturers also increase following the announcement of the attempted takeover?
Q:
During an economic expansion, the supply of bonds ________ and the supply curve shifts to the ________.
A) increases, left
B) increases, right
C) decreases, left
D) decreases, right
Q:
Why did the Cadbury common share price close up 38% on the announcement date, 7% more than the premium built into the offer price?
Q:
Factors that cause the demand curve for bonds to shift to the left include
A) a decrease in the inflation rate.
B) an increase in the volatility of stock prices.
C) an increase in the liquidity of stocks.
D) all of the above.
E) only A and B of the above.
Q:
Which firm is the acquirer and which is the target firm?
Q:
Factors that cause the demand curve for bonds to shift to the left include
A) an increase in the inflation rate.
B) an increase in the liquidity of stocks.
C) a decrease in the volatility of stock prices.
D) all of the above.
E) none of the above.