Q1. If Raider Ltd, the acquirer, has 2 million shares with a market value of $4 each and Sucker Ltd, the target, has 1 million shares with a market value of $1.50 each, what is the perceived benefit per share in Raider Ltd from the takeover if Raider Ltd offers two of its own shares for every one share of Sucker Ltd? A) $3.25 per share.

B) $4 per share.

C) $0.00 per share.

D) $2.50 per share.

Q2. In practice, there may be an increase in the share price following the announcement by a company of a forthcoming bonus issue. Which of the following is a likely explanation of this phenomenon? A) Companies tend to increase their total dividend payout following a bonus issue.

B) Bonus issues create wealth for shareholders. C) Bonus issues reduce the debt/equity ratio and, therefore, the riskiness of the firm.

D) Bonus issues increase the dividend payout ratio of companies.