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Chapter 5: Expanding the Perspective of Corporate Finance

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Foundations Of Financial Management
Pages: 630 - 768
Foundations Of Financial Management

Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

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49 Questions for Chapter 5: Expanding the Perspective of Corporate Finance

  1. Chicago Savings Corp. is planning to make an offer for Ernie’s Bank & Trust. The stock of Ernie’s Bank & Trust is currently selling for $44 a share.

    Found on Page 652
  2. Assume the Knight Corporation is considering the acquisition of Day Inc. The expected earnings per share for the Knight Corporation will be $4.00 with or without the merger. However, the standard deviation of the earnings will go from $2.40 to $1.60 with the merger because the two firms are negatively correlated.

    Found on Page 653
  3. General Meters is considering two mergers. The first is with Firm A in its own

    Found on Page 653
  4. J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $4,500,000. Patterson will provide the following pattern of cash inflows and synergistic benefits for the next 20 years. There is no tax loss carryforward.

    Found on Page 650
  5. Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $1.6 million. Medical Labs will provide the following pattern of cash inflows and synergistic benefits for the next 25 years. There is no tax loss carryforward.

    Found on Page 650
  6. Assume the following financial data for Rembrandt Paint Co. and Picasso Art Supplies:

    Found on Page 650
  7. Assume the following financial data for the Noble Corporation and Barnes

    Found on Page 651
  8. The Jeter Corporation is considering acquiring the A-Rod Corporation.

    Found on Page 651
  9. The Hollings Corporation is considering a two-step buyout of the Norton Corporation. The latter firm has 2.5 million shares outstanding and its stock price is currently $40 per share. In the two-step buyout, Hollings will offer to buy 51 percent of Norton’s shares outstanding for $62 per share in cash and the balance in a second offer of 840,000 convertible preferred stock shares. Each share of preferred stock would be valued at 40 percent over the current value of Norton’s common stock. Mr. Green, a newcomer to the management team at Hollings, suggests that only one offer for all Norton’s shares be made at $59.25 per share. Compare the total costs of the two alternatives. Which is better in terms of minimizing costs?

    Found on Page 652
  10. Al Simpson helped start Excel Systems several years ago. At the time, he purchased116,000 shares of stock at $1 per share. Now he has the opportunity to sell his interest in the company to Folsom Corp. for $50 a share in cash. His capital gains tax rate would be 15 percent.

    Found on Page 652

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