Global Business Policies Exam 2
kemore177
Research has shown that shareholders of ____ earn above average returns as the result of an acquisition
target (acquired) firms
According to When to Ally, When to Acquire:
when the resources are similar in both the target and acquiring firms, an acquisition would be more appropriate so that there is more control over the resources
Innovator Tech is a highly innovative, small computer animation company with significant creative talent. Animation Inc, a large established animation firm, wants access to Innovator Tech's creative people. According to "When to Ally, When to Acquire", Animation Inc. should approach Innovator Tech regarding:
an alliance between Animation Inc and Innovator Tech
Company A acquires 51% of Company B. This would be considered____
an acquisition
T/F An important risk of an alliance is that your partner today could become your competitor in the future
T/F Alliances are generally easier to manage and are generally more successful than acquisitions
Risks of operating internationally include:
war, enforcing intellectual property rights, currency fluctuations, unstable governments
a transnational strategy requires
high centralized control and coordination and high local responsiveness
a motive for forming an international joint venture is:
international expansion, gaining new knowledge and perspectives, lowering costs
reasons firms operating internationally include:
Access to resources, new opportunities to deploy resources, increase the product life cycle, increase economies of scale
for a global strategy:
economies of scale create an advantage
T/F the terms economies of scope, synergies, and 1+1>2 all refer to ways the diversified firm creates and captures value
T/F When considering diversification into a new industry, it is the relatedness of the products produced (not the relatedness of the value chain activities) that creates value
Corporate-level strategy is different from business-level strategy, the key questions for managers to address at the corporate level are:
in what businesses/industries should the firm engage, what structure and administrative system will lead to value creation for a multidivisional firm, how should the firm diversify
when considering diversifying into a new industry, managers should investigate:
attractiveness- the industry chosen for diversification must be structurally attractive or capable of being made attractive
better-off- either the new unit must gain competitive advantage from its link with the corporation or vice versa
cost-of-entry- the cost cost entry must not use up all the future profits
Economies of scope are:
when cost of producing and selling multiple products together is lower than the cost of producing and selling the same quantity of goods individually
T/F Many firms began to operate more efficiently as a result of the threat of takeover, though the actual number of hostile takeovers was small
the board of directors:
monitors (on behalf of the shareholders) the activities and decisions of the managers
regarding executive compensation and governance:
the goal of executive compensation is to align executive and owner goals
managers are thought to behave rationally and as such will act on behalf of
their own self-interest
agency theory (and the principal-agent problem) deals with the conflict that arises between
shareholders and managers
Transportation and Logistics Exam 2
PSYCH 232 - Chapter 6
brendalavandier
Government Exam Two
catherinethomas7504
Unit 5 quiz
Zehava20
Revision for clinical psychology paper
ninmetPLUS
If a firm goes from zero debt to successively higher levels of debt, why would you expect its stock price to rise first, then hit a peak, and then begin to decline?
Maria Juarez is a professional tennis player, and your firm manages her money. She has asked you to give her information about what determines the level of various interest rates. Your boss has prepared some questions for you to consider. a. What are the four most fundamental factors that affect the cost of money, or the general level of interest rates, in the economy? b. What is the real risk-free rate of interest $\left(\mathrm{r}^{*}\right)$ and the nominal risk-free rate $\left(\mathrm{r}_{\mathrm{RF}}\right) ?$ How are these two rates measured? c. Define the terms inflation premium (IP), default risk premium (DRP), liquidity premium (LP), and maturity risk premium (MRP). Which of these premiums is included in determining the interest rate on (1) shortterm risk premium (MRP). Which of these premiums is included in determining the interest rate on (1) shortterm and (4) long-term corporate securities? Explain how the premiums would vary over time and among the different securities listed. d. What is the term structure of interest rates? What is a yield curve? e. Suppose most investors expect the inflation rate to be 5% next year, 6% the following year, and 8% thereafter. The real risk-free rate is 3%. The maturity risk premium is zero for bonds that mature in 1 year or less and 0.1% for 2-year bonds; then the MRP increases by 0.1% per year thereafter for 20 years, after which it is stable. What is the interest rate on 1-, 10-, and 20-year Treasury bonds? Draw a yield curve with these data. What factors can explain why this constructed yield curve is upward sloping? f. At any given time, how would the yield curve facing a AAA-rated company compare with the yield curve for U.S. Treasury securities? At any given time, how would the yield curve facing a BB-rated company compare with the yield curve for U.S. Treasury securities? Draw a graph to illustrate your answer. g. What is the pure expectations theory? What does the pure expectations theory imply about the term structure of interest rates? h. Suppose you observe the following term structure for Treasury securities: $$ \begin{matrix} \text{Maturity} & \text{Yield}\\ \text{1 year} & \text{6.0\\%}\\ \text{2 years} & \text{6.2}\\ \text{3 years} & \text{6.4}\\ \text{4 years} & \text{6.5}\\ \text{5 years} & \text{6.5}\\ \end{matrix} $$ Assume that the pure expectations theory of the term structure is correct. (This implies that you can use the yield curve provided to "back out" the market's expectations about future interest rates.) What does the market expect will be the interest rate on 1-year securities 1 year from now? What does the market expect will be the interest rate on 3-year securities 2 years from now? Calculate these yields using geometric averages. i. Describe how macroeconomic factors affect the level of interest rates. How do these factors explain why interest rates have been lower in recent years?
Why are interest charges not deducted when a project's cash flows for use in a capital budgeting analysis are calculated?
You want to buy a car, and a local bank will lend you $40,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 8% with interest paid monthly. What will be the monthly loan payment? What will be the loan's EAR?