1. To decide if a business is worth more to the shareholder if sold, the parent firm generally considers all of the following factors except for

1. The after-tax cash flows of the business to be sold
2. The after-tax sale value of the business to be sold
3. The parents cost of capital
4. A and B
5. A, B, and C

1. Which of the following is not a characteristic of a spin-off?

1. The parent creates a new legal subsidiary for the business to be spun-off
2. The shares of the new subsidiary are sold to the public
3. The ownership of shares in the new legal subsidiary is the same as the stockholders proportional ownership of shares in the parent firm
4. The new business once spun-off has its own management and board
5. Spin-offs are generally not taxable to the parents shareholders if properly structured

4. 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