Question 1

Transaction costs include all of the following costs except

Accepted Answer

A)   agency costs.
B)   negotiating costs.
C)   search costs.
D)   monitoring costs.E) B) and D)
F) All of the above

Question 2

Diversified public corporations,such as Berkshire Hathaway and Virgin Group,create value through management expertise by improving plans and budgets.This is an example of a related diversification strategy.

Accepted Answer

A) True 
 B)False

Question 3

Divestment is useful to help a firm reverse an earlier acquisition that did not result in successful growth.

Accepted Answer

A) True 
 B)False

Question 4

One of the obligatory aspects of strategic alliances is the dependence on written contracts to delimit responsibilities and enforce compliance.

Accepted Answer

A) True 
 B)False

Question 5

In analyzing the Cabot Corporation portfolio using the BDG matrix,the company decided to shift away from its core competence to unrelated areas of its business.The ensuing decline in assets indicated that it needed to return to its core competence in order to grow.

Accepted Answer

A) True 
 B)False

Question 6

An antitakeover tactic in which existing shareholders have the option to buy additional shares of stock at a discount to the current market price is called ______.

Accepted Answer

A)   greenmail
B)   a golden parachute
C)   a poison pill
D)   scorched earthE) B) and C)
F) None of the above

Question 7

The Cisco acquisition of Pure Digital Technologies,the parent of the Flip video camera,failed because

Accepted Answer

A)   Cisco had valuable competencies.
B)   the Flip division of Cisco was slow and less responsive to market pressures.
C)   consumers continued to purchase the camera.
D)   Cisco had good vision of the market.E) B) and C)
F) A) and B)

Question 8

Unfriendly or hostile takeovers always occur when the stock of the company becomes undervalued.

Accepted Answer

A) True 
 B)False

Question 9

With unrelated diversification,potential benefits can be gained from vertical or hierarchical relationships; that is,the creation of synergies from the interaction of the corporate office with outside stakeholders.

Accepted Answer

A) True 
 B)False

Question 10

A golden parachute is a prearranged contract with managers specifying that,in the event of a hostile takeover,the target company managers will be paid a significant severance package.

Accepted Answer

A) True 
 B)False

Question 11

Poison pills always are used to protect the best interests of management.

Accepted Answer

A) True 
 B)False

Question 12

One of the reasons that the Cisco acquisition of the Flip product failed is that the core businesses were very different.

Accepted Answer

A) True 
 B)False

Question 13

Sprint and Nextel merged in 2005.The successful merger resulted in a 31 billion USD merger-related charge that lead to a 76 percent decrease in its value by late 2012.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not a reason for merger and acquisition failures?

Accepted Answer

A)   The acquiring company pays a premium for the common stock of the target company.
B)   Top executives act in their best interests rather than those of the shareholders.
C)   The acquired company assets are poorly integrated into the acquiring company business lines.
D)   The acquisition leads to value creation.E) C) and D)
F) A) and B)

Question 15

The primary means by which a firm can diversify are __________,_________,and ________.

Accepted Answer

A)   mergers and acquisitions; differentiation; overall cost leadership
B)   mergers and acquisitions; joint ventures and strategic alliances; internal development
C)   joint ventures and strategic alliances; integration of value chain activities; acquiring human capital
D)   mergers and acquisitions; internal development; differentiationE) All of the above
F) A) and D)

Question 16

Zara,a Spanish clothing company,operates stores in over 70 countries.When entering markets very distant from its home markets,Zara rarely uses local alliance partners to help it negotiate the different cultural and regulatory environments.

Accepted Answer

A) True 
 B)False

Question 17

The term golden parachute refers to

Accepted Answer

A)   a clause requiring that huge dividend payments be made upon takeover.
B)   pay given to executives fired because of a takeover.
C)   financial inducements offered by a threatened firm to stop a hostile suitor from acquiring it.
D)   managers of a firm in a hostile takeover approaching a third party about making the acquisition.E) All of the above
F) B) and C)

Question 18

Greenmail is an offer by a company,threatened by takeover,to offer its stock at a reduced price to a third party.

Accepted Answer

A) True 
 B)False

Question 19

Corporate-level strategy focuses on gaining short-term revenue through managing operations in multiple businesses.

Accepted Answer

A) True 
 B)False

Question 20

One of the reasons it is said that only the investment banker wins when a company is acquired is that they

Accepted Answer

A)   assure the newly acquired company will be successful.
B)   continue to work with the two companies involved.
C)   collect huge up-front fees regardless of the outcome afterwards.
D)   monitor the progress of both companies for long term growth.E) B) and C)
F) C) and D)

Exam 6: Corporate-Level Strategy: Creating Value Through Diversification

Unfriendly or hostile takeovers always occur when the stock of the company becomes undervalued.

Correct AnswerverifiedShow Answer

An antitakeover tactic in which existing shareholders have the option to buy additional shares of stock at a discount to the current market price is called ______.

Correct AnswerverifiedShow Answer

Transaction costs include all of the following costs except

Correct AnswerverifiedShow Answer

Which of the following is not a reason for merger and acquisition failures?

Correct AnswerverifiedShow Answer

A golden parachute is a prearranged contract with managers specifying that,in the event of a hostile takeover,the target company managers will be paid a significant severance package.

Correct AnswerverifiedShow Answer

The primary means by which a firm can diversify are __________,_________,and ________.

Correct AnswerverifiedShow Answer

In analyzing the Cabot Corporation portfolio using the BDG matrix,the company decided to shift away from its core competence to unrelated areas of its business.The ensuing decline in assets indicated that it needed to return to its core competence in order to grow.

Correct AnswerverifiedShow Answer

Sprint and Nextel merged in 2005.The successful merger resulted in a 31 billion USD merger-related charge that lead to a 76 percent decrease in its value by late 2012.

Correct AnswerverifiedShow Answer

Diversified public corporations,such as Berkshire Hathaway and Virgin Group,create value through management expertise by improving plans and budgets.This is an example of a related diversification strategy.

Correct AnswerverifiedShow Answer

One of the reasons that the Cisco acquisition of the Flip product failed is that the core businesses were very different.

Correct AnswerverifiedShow Answer

The Cisco acquisition of Pure Digital Technologies,the parent of the Flip video camera,failed because

Correct AnswerverifiedShow Answer

The term golden parachute refers to

Correct AnswerverifiedShow Answer

Greenmail is an offer by a company,threatened by takeover,to offer its stock at a reduced price to a third party.

Correct AnswerverifiedShow Answer

Zara,a Spanish clothing company,operates stores in over 70 countries.When entering markets very distant from its home markets,Zara rarely uses local alliance partners to help it negotiate the different cultural and regulatory environments.

Correct AnswerverifiedShow Answer

One of the reasons it is said that only the investment banker wins when a company is acquired is that they

Correct AnswerverifiedShow Answer

Divestment is useful to help a firm reverse an earlier acquisition that did not result in successful growth.

Correct AnswerverifiedShow Answer

Poison pills always are used to protect the best interests of management.

Correct AnswerverifiedShow Answer

Corporate-level strategy focuses on gaining short-term revenue through managing operations in multiple businesses.

Correct AnswerverifiedShow Answer

With unrelated diversification,potential benefits can be gained from vertical or hierarchical relationships; that is,the creation of synergies from the interaction of the corporate office with outside stakeholders.

Correct AnswerverifiedShow Answer

One of the obligatory aspects of strategic alliances is the dependence on written contracts to delimit responsibilities and enforce compliance.

Correct AnswerverifiedShow Answer

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The primary means by which a firm can diversify are ______,_,and ____.

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