A spin-off may create shareholder wealth for all of the following reasons except for

1. Spin-offs are generally not taxable if properly structured
2. The spin-offs management and board is independent of the former parent
3. Investors will be better able to value the spin-off
4. The cost of capital of the spin-off is generally higher than when it was part of the parent
5. The spin-off may be subsequently acquired by another firm

6. Which one of the following is generally not a reason for issuing tracking stocks?

1. To give investors a pure play in a specific business owned by the parent
2. To create a currency for the business to acquire other firms
3. To enhance the likelihood that the business will be acquired
4. To create an incentive for management receiving the stock
5. To raise capital for the parent or for the business for which the tracking stock is created

2. Which of the following best defines market segmentation

1. The identification of customers with common characteristics and needs
2. The identification of customers with heterogeneous characteristics and needs
3. The grouping of customers with different characteristics
4. The process of reducing large markets into smaller markets without regard to customer characteristics
5. The process of identifying the various markets that comprise an industry without regard to customer characteristics