1. Briefly discuss some of the more logical reasons for mergers to occur.

2. Why diversification not reason for merger?

3. Why is it stated that the safest way of evaluating the potential gains from a merger is to focus on the changes in cash flow that will transpire as a result of the merger?

4. What is the tax reason for not paying generous cash dividend?

5.How framing effects can result in inconsistent or incorrect decisions.

6.How behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making

7.How the use of heuristics can lead to suboptimal financial decisions.

8.Explain the differences between purchasing an asset and leasing an asset

9.

• Explain the differences between an operating lease and a financial lease.

Tutorial: Merger 1. Briefly discuss some of the more logical reasons for mergers to occur. The overriding reason for mergers to occur is when the value of the combined firms exceeds the value of the separate firms combined. There are several reasons that this could occur, including economies of scale, economies of vertical integration, the combining of complementary resources, or as a use for surplus funds. Economies of scale occur most frequently in horizontal mergers, but can also occur in conglomerate mergers. These economies occur due to spreading fixed costs out over larger production bases such that average production cost is reduced. With vertical integration, a firm basically adds profit potential to the extent that a step before or a step after in the production or distribution system is no longer needed. The combination of complementary resources can of course take several 2. Why diversification not reason for merger? 3. Why is it stated that the safest way of evaluating the potential gains from a merger is to focus on the changes in cash flow that will transpire as a result of the merger? Tutorial: Behavioral Finance: Implications for Financial Management 1. How behaviors such as overconfidence, overoptimism, and confirmation bias can affect decision making. 2. How framing effects can result in inconsistent or incorrect decisions. 3. How the use of heuristics can lead to suboptimal financial decisions. Tutorial 12: Leasing 9. Explain the differences between purchasing an asset and leasing an asset. 10. Explain the differences between an operating lease and a financial lease. 11. An asset costs $330,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 7 percent and the lessee can borrow at 9 percent. The corporate tax rate is 34 percent for both companies. How does the fact that the lessor and lessee have different borrowings rates affect the calculation of the NAL? TUTORIAL 4: DIVIDEND 3. What is the tax reason for not paying generous cash dividends