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Question 1 In a merger, target's industry buys from or sells to acquirer's industry. A. horizontal B. vertical C. conglomerate D. consolidation E. leveraged Question 2 ANB announced to acquire all the shares (number of shares = 1 million) of NextGen Ltd in cash. The share price of NextGen increased from $44.6 to $50 immediately after the announcement. Assume the merger will be completed for sure. If NextGen is expected to receive 80% of the total synergy, the value of the total synergy is closest to: A. $5.4 million B. $50 million C. $1.08 million D. $6.75 million E. None of the above Question 3 According to the theory of tax clientele for dividend policies: A. companies should maintain a stable payout policy. B. companies should pay cash dividends only. C. companies should use share repurchases only. D. companies shouldn't pay dividends. E. investors are indifferent between cash dividends and share repurchases. Question 4 Assume tax is the only factor that influences shareholders' preference for dividend and companies try to maximise shareholders' wealth. In a world where all investors pay 30% dividend income tax and 0% capital gain tax, which of the following is least likely to happen? A. Companies do not dividends. B. Companies distribute cash through share repurchases. C. Companies replace share repurchases with cash dividends. D. High-growth companies retain cash while mature firms repurchase shares. E. Companies replace cash dividends with share repurchases. Question 5 According to the real option theory, it is rational for a company to invest in a negative NPV project today if A. the project has a low risk. B. the project cannot be terminated in future. C. the investment can be deferred. D. the project provides a future growth opportunity. E. the project has a short payback period. a Question 6 Assume risk free interest rate is 6% p.a. and the share price changes following the binomial process below. The risk neutral probability for the share price to increase is closest to: t=0 t=1 t=2 24.2 22 20 19.8 18 16.2 A. 50% B. 60% C. 70% D. 75% E. 80% Question 7 The relation between the value of a European call option and the underlying assets volatility is A. positive. B. negative. C. positive when the option is in-the-money but negative when the option is out-of-the- money. D. positive when the option is out-of-the-money but negative when the option is in-the- money. E. theoretically unclear. Question 8 A board of directors is said to be captured when: A. a majority of the directors are independent directors. B. a majority of the directors are outside directors. C. when the CEO also serve as a director D. its monitoring duties have been compromised by connections or perceived loyalties to management. E. when the CEO also serves as chairman of the board of directors. Question 9 Dual class shares are best defined as: A. a process where a company issues both common and preferred stock to finance the company. B. a scenario in which companies have more than one class of shares and one class has superior voting rights over the other class. C. a scenario in which 51% of the shares are held by a holding company which is part of a pyramid structure. D. a process where a company issues shares in two separate countries each trading on a separate stock exchange. E. None of the above Question 10 Directors who are not employees, former employees, or family members of employees and who do not have existing or potential business relationships with the firm are called: A. monitoring directors. B. independent directors. C. grey directors. D. inside directors. E. executive directors