Reference no: EM132784250

True or False

Question 1: Divestiture is the sale of a major component or segment of a business (eg brand or product line) to another company

Question 2: Spin off is separating a segment or component business and transforming this into a separate legal entity whose ownership will be transferred to shareholders

Question 3: Leveraged buyout is the acquisition of another business by using significant debt which uses the acquired business as a collateral.

Question 4: Synergy can be attributable to more efficient operations, cost reductions, increased revenues,combined products markets or cross-disciplinary talents of the combined organization

Question 5: Corporate finance mainly involves managing the firm's capital structure including funding sources and strategies that the business should pursue to maximize firm value

Question 6: Valuation is also important to businesses because of legal and tax purposes.

Question 7: Top down forecasting approach - Forecast starts from international or national macroeconomic projections with utmost consideration to industry specific forecasts

Question 8: Bottom-up forecasting approach - Forecast starts from the lower levels of the firm and bulids the forecast as it captures what will happen to the company

Question 9: Sensitivity analysis is the common methodology in valuation exercises wherein multiple other analyses are done to understand how changes in an input or variable will affect the outcome (i.e. firm value).

Question 10: Uncertainty is captured in valuation models through cost of capital or discount rate