Reference no: EM133110598

TRUE or FALSE: 

1. Among the sources of financing, cash is the lowest source of financing as it is coming from retained earnings.
2. An option to find the optimal deal for a company's shareholders can be found in the go-shop process, and it is a deal that is beneficial both for the company as well as the investors
3. AHP's price/earnings ratio decreased by about 40% during Laporte's tenure as chief executive. 
4. The agreement between Berkshire Hathaway, 3G Capital, and Heinz is a form of acquisition and not a merger.
5. A financial buyer is concerned with operating synergies to maximize potential gains from an acquisition
6. When innovative products by AHP's competitors are introduced, AHP will respond by making similar product and will rely on its marketing clout to erode competitors' head start. 
7. The go-shop process is a process where sellers of a company or operating division may look for better offers and is a provision benefiting only the seller of the process.
8. Acquisition premiums are relevant for stock purchases. This tells you how much the acquisition price in terms of stocks. The premium is calculated as using a moving average of the stock price and setting it equal to that price. The number of shares is calculated using that price as a base.
9. There are many uses of land when discussing real estate such as residential, commercial, and retail. We can determine the highest and best use using the one which provides the highest gross profit margin.
10. The concept for the cost approach to real estate valuation is that you should not pay more for a property than the cost of buying vacant land and developing a comparable property.
11. A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of debt. 
12. For the valuation of real estate using the Income Approach, the net operating income, a measure of income, and a proxy for cash flow is of utmost importance.
13. For the income approach of valuing real estate, the cap rate is the same as the discount rate.
14. ETFs and mutual funds, despite being liquid, are considered Alternative Investments.
15. AHP's non-reliance on debt financing resulted in a high-interest coverage ratio, which indicated that it can pay up to 100x their interest dues to creditors.
16. Acquisition Premium is approximately 75%, above the company's share price the day before. This is reasonable due to the value-added for Heinz shareholders and the positive valuation for the group and because it was around the industry benchmark of 73%. 
17. The American Home Products (AHP) Corporation has been established as one of the industry's leading brands. It primarily deals in four business lines: prescription drugs, food items, packaged goods, housewares, and household products. AHP's most profitable and largest unit is prescription drugs which have a large and well-diversified market share. 
18. While most of the firms embrace variations, APH has a long-standing policy of centralizing complete authority in the chief executive. 
19. Before entering a go-shop process, a company must ensure that the risk greatly outweighs the benefit given the high cost and time consumed in the process.
20. Multi-channel retailing refers to the process of using a single channel for selling similar products across multiple platforms.