ce expected (2 points) synergies from proposed transactions? 33. For which of th

Question

ce expected (2 points) synergies from proposed transactions? 33. For which of the following companies would the Discounted Cash Flow projection period most likely be longer than 5 years? 2 points) a. Utility b. Capital goods c. Retailer d. Automotive 34. The Capital Asset Pricing Model (CAPM) is based upon the premise that equity investors need to be compensated for their assumption of (2 points) Systematic risk Unsystematic risk Default risk Risk of financial distress a. b. c. d. 35. What does Days Sales Outstanding measure? (2 points) Number of days it takes to collect payment after the sale of a product or service on a. credit. b. Number of days a customer is overdue on their payment. c. Number of days a customer has remaining to pay their balance. d. Number of days it takes to make payment on outstanding purchases of goods and services 36. How does using a mid-year convention affect the Perpetuity Growth Method (PGM) and the Exit Multiple Method (EMM)? 2 points) a. Mid-year convention is used in PGM; year-end is used in EMM. b. Mid-year convention is used in EMM; year-end is used in PGM. c. Mid-year convention is used in both PGM and EMM. d. Mid-year convention is NOT used in PGM or EMM. BFIN 7225 - Final Exam - Fall 2017 20171030.docx Page 7 of 10

Explanation / Answer

32. Public companies that are making acquisitions typically announce expected synergies so as to generate a positive point of view from the shareholders regarding the acquisition. In several cases shareholders do not view an acquisition favorably and as such the share prices of a public company starts falling. To avoid this and to create a positive investor sentiment public companies announce expected synergies from proposed transactions.

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