Question

As long as it can be documented that the target was the firm responsible for pollution at a site, the buyer cannot be held responsible for its cleanup.

True

False

Flag this Question

Question 6 2 pts

Free cash flows are cash flows that are available to the equity holders and creditors of a firm after all other obligations have been paid.

True

False

Flag this Question

Question 7 2 pts

When using WACC, the value of the interest tax shield is accounted for by using the firm’s after-tax cost of debt.

True

False

Flag this Question

Question 8 2 pts

When valuing a firm, we should care more about what happened in the past than about what is expected to happen in the future.

True

False

Flag this Question

Question 9 2 pts

If a restructuring company is in need of new funds and the IPO market is hot, it would make sense for it to do an equity carve-out.

True

False

Flag this Question

Question 10 2 pts

“Consideration” is when an acquisition offer is made to the management of the target firm.

True

False

Answer 1

1. True

Explanation : As it is the responsibility opf the company to do manufacturing by taking care of pollution and other laws applicable buyer should not be the person who should be asked for compensation in terms of cleaning it up.

All though company recovers it in terms of raising price or reducing quantity or quality from buyers only or by using shareholders fund or reserves.

But buyer is not the first person who is responsible for the cleanup.

2. False

Explanation: Free cash flow is fund available to the security holder ,debt holder, preffered stock holders after doing all the obligations paid off.

It doesn't consider creditors as they are also liabality to pay

It is mainly used to pay dividend and bonus.

3.True

Explanation: Value of interest has to be taken after tax because tax is the savings in cost to the company is paying net of tax amount to the investor or debenture holder.

So it reduces the payment by deduction of tax at source.

4. False

Explanation: valuation of the firm should be done on the basis of it's future cash generating capacity and not it's history because it's the future time when the buyer is going to be in the business and not the golden or bad past history.

So value of future expected things should be taken into consideration.