Series 79: Chapter 10 Practice Questions

Taken from our Series 79 Top-off Online Guide

Chapter 10 Practice Questions

  1. 1. Highly Saleable Corp. has decided to put itself up for sale and has retained an investment bank to assist with the sale process. Highly Saleable and the investment bank negotiate an engagement letter. The engagement letter is least likely to include which of the following terms?
  2. A. Length of the engagement
  3. B. Total dollar amount the investment bank will earn as a fee
  4. C. Scope of the engagement
  5. D. Conditions under which either party may terminate the engagement
  6. 2. Overly Complex Corp. decides to divest itself of its Mid-Sized Siliconized Widgets division. The division will become an independent corporation, and its shares will be distributed to the shareholders of Overly Complex on a proportional basis. The proposed transaction is best described as a:
  7. A. Split-off
  8. B. Cash-out
  9. C. Spin-off
  10. D. Run-off
  11. 3. Assuming that a buyer intends to acquire essentially an entire company rather than a certain portion, which of the following types of transactions do not normally require a vote by the seller’s shareholders?
  12. A. Tender offer
  13. B. Asset purchase
  14. C. Traditional stock purchase
  15. D. Merger of equals
  16. 4. Which of the following is true of a tax-free reorganization?
  17. I. Stock of the buyer must comprise a significant portion of the consideration
  18. II. Qualifying transactions are tax-exempt for a minimum of 10 years
  19. III. The purchased company or assets must be liquidated within one year
  20. IV. The cash portion of the consideration is taxable to the seller
  21. A. I and IV
  22. B. I and III
  23. C. I and IV
  24. D. II and III
  25. 5. A large payment made to a corporate executive upon a change in control of the corporation is known as:
  26. A. A gilded ticket
  27. B. A golden parachute
  28. C. Golden handcuffs
  29. D. Diamond cufflinks
  30. 6. In a merger or acquisit

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