Corporate Finance – FIN 622 Semester Spring 2016

Corporate Finance-FIN622Quiz 02QUIZ NO: 02Spring 2016Instructions:Corporate Finance – FIN 622Semester Spring 2016Max Marks: 10•Attempt all Questions.•This quiz consists of ten Multiple Choice Questions, carrying one mark each.•Solve your quiz in an MS Word file. Your solution file must be on the followingformat.QuestionQuestion # 01Question # 02Question # 03Correct ChoiceCDB•Due Date & Time: Submit your Quiz solution before Midnight (12:00 AM) on7/5/2016•No solution will be accepted after the expiry of due date and time.Multiple Choice Questions:1.A firm wants to acquire another firm by purchasing its assets. Which of the followingmethod could the firm use to evaluate the financial aspects of this deal?a.Breakup value methodb.Dividend valuation methodc.Present value methodd.Price earning ratio method2.Which of the following is a major limitation of an income based method of sharevaluation?a.Future growth assumptionsb.Estimation of future cash flowsc.Future cash flow valuationd.Future cash flow discounting3.All of the following are related to an income based method of shares valuationEXCEPT?a.Future cash flowsb.Future growthc.Discount rated.Book valuesCorporate Finance-FIN622Quiz 02Spring 20164.Which of the following statement applies to employees’ buyout?a.Employees are promoted to the higher positionsb.Employees are given more responsibilitiesc.Employees buy majority shares in the firmd.Employees buy shares of a competing firm5.Management of a firm prefers buyout because of the following reason?a.The company is selling at below the market priceb.The company has good future prospectsc.Company offers good productd.Company’s management could change6.Which of the following could be a major disadvantage of an LBO?a.The acquired firm would have a high interest expenseb.The acquired firm would have a high operating costc.The acquired firm would have a high manufacturing costd.The acquired firm would have a high operating risk7.In which of the following acquisition strategy, a purchaser has complete knowledgeof the acquiring firm?a.Management Buy-Inb.Management buyoutc.Consolidationd.Amalgamation8.Which of the following would be an example of an MBO?a.Management of a firm-A purchases majority shares from the shareholdersb.Management of a firm-A acquires majority shares in another firm-Bc.Management sale out some assets of the firmd.Management buy some new plants and machinery9.All of the following could be an outcome of financial distress of a firm EXCEPT?a.Employees are leaving the firmb.Suppliers refuse to supply on creditc.Banks do not provide loansd.Financial markets become instable10. Choose the correct statement?a.The price at which a FX dealer will sell a variable currency is called offer priceb.The price at which an FX dealer will buy the base currency is called bid pricec.The price at which an FX dealer will sell a variable currency is called bid priced.The price at which an FX dealer will sell a base currency is called bid price