Q1

The target shareholder would do all of the following except:

a. prefer a share purchase to an asset purchase

b. attempt to increase his net worth by claiming some of the step-up benefits in case of asset purchase

c. prefer a single to multiple bids

d. may prefer a cash offer to a share swap

e. resist a hostile takeover

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Q2

Jason bought 1,000 shares of Company T at $ 25/share on January, 2014. In July 2016, Company T was bought by Company B through an all cash deal and the offer was $ 30/share.

Now, Company B shares are trading at $ 35/share.

The capital gain tax Jason had to pay if his marginal tax rate is 40% was:

a. $ 2,000

b. $ 1,000

c. $ 4,000

d. $ 3,000

e.$ 2,500

Q3

Which of the following statement is false:

a. real options can be applied to M&A projects under certain circumstances

b. when applying real options to M&A projects, both put and call options can be used, depending on the nature of the projects

c. real options are useful for evaluating M&A projects only if the implementation of these projects can be postponed to a later date

d. a real option has a positive value only if the immediate implementation of the M&A project results in a negative NPV

e. paying for the exclusive right to postpone a M&A project is only worthwhile if the calculated value of the option is greater than what the potential target is asking for granting this option

*Note M&A = Mergers and Acquisition