Question 22-26
22. Which of the following is not true of a forward triangular cash merger? It is considered by the IRS as a purchase of target assets. It is generally followed by a liquidation of the target firm Target shareholders must target' s tax attributes carry over to the bayer. recognize a gain or loss as if they had sold their shares I axes are paid by the target firm on any gain on the sale of its assets and again by sharehelders who receive a liquidating dividend. 23. In a statutory merger, Only known assets and liabilities are automatically transferred to the buyer. b. Only known and unknown assets are transferred to the buyer All known and unknown assets and liabilities are automatically transferred to the buyer except for those the seller agrees to retain The total consideration received by the target's shareholders is automatically taxable None of the above. 24. Which of the following is not a characteristic of a joint venture corporation? Profits and losses can be divided between the partners disproportionately to their ownership New investors can become part of the JV corporation without having to dissolve the original IV b. corporate structure. The JV corporation can be used to acquire other firms. Investors' liability is limited to the extent of their investment The JV corporation may be subject to double taxation. 25. Which of the following is true of collar arrangements? A fixed or constant share exchange ratio is one in which the number of acquirer shares exchanged for each target share is unchanged between the signing of the agreement of purchase and sale and closing b. Collar agreements provide for certain changes in the exchange ratio contingent on the level of the c. A fixed exchange collar agreement may involve a fixed exchange ratio as long as the acquirer's d. acquirer's share price around the effective date of the merger. share price remains within a narrow range, calculated as of the effective date of merger. A fixed payment collar agreement guarantees that the target firm shareholder receives a certain dollar value in terms of acquirer stock as long as the acquirer's stock remains within a narrow range, and a fixed exchange ratio if the acquirer's average stock price is outside the bounds around the effective date of the merger e All of the above. 26. Fair market value is a. The cash or cash equivalent value that a willing buyer would pay or seller would accept for a business The cash or cash equivalent value that a willing buyer would pay or seller would accept for a business, assuming each had access to all necessary information b. business, assuming each had access to all necessary information and that neither party is unde duress. c. The cash or cash equivalent value that a willing buyer would pay or seller would accept for a d. The discounted value of free cash flow to the firm e. The discounted value of free cash flow to equity investors
