1. What is a sale and lease back and why would a corporation do this?
2. Why might a lease be easier to finance (or do) than a straight borrowing for the purchase of an asset? Explain two reasons
3. When should the cancellation provision be negotiated (before or after the lease is signed)? Pick one
4. What type of lease shows up on the balance sheet of a corporation?
5. At what cost of money (or rate) do you bring the residual value back to present?
6. At what cost of money (or rate) do you bring the after-tax cost of the lease payments back to present?
7. Would gaining market power be a value or management related reason for merging? Pick one.
8. Would reducing volatility in sales and income (without a commensurate decrease in the cost of capital) be a value or management related reason of a merger.
9. What must be present for there to be a difference between the minimum exchange ratio and the maximum exchange ratio?
10. You own a company and it is being purchased by another company. You do not believe the synergistic benefits from the merger will materialize in the future. When you are negotiating the sale of your company, should you push for a stock-for-stock exchange or a cash-for-stock exchange in selling your company (disregard any tax consequences)?