Question

Which of the following is not true of liquidity or marketability risk or discount?   

1. It is measurable.
2. It is believed to have declined in recent years
3. The magnitude of the discount or risk is inversely related to the size of the investor’s equity ownership in the business.
4. The magnitude of the discount or risk is directly related to the size of the investor’s equity ownership in the business.
5. It is important to adjust the discount rate for liquidity risk.

Corporate shells have value because they enable the buyer to   

1. Avoid the cost of going public
2. Exploit intangible value such as brand name
3. A and D only
4. Provide limited liability
5. A, B, and D only       

1. Which of the following should be considered important components of the deal structuring process?

1. Legal structure of the acquiring and selling entities
2. Post closing organization
3. Tax status of the transaction
4. What is being purchased, i.e., stock or assets
5. All of the above

Answer 1

The correct answer is option d i.e.The magnitude of the discount or risk is directly related to the size of the investor’s equity ownership in the business.

The correct answer is option e i.e. A, B and D only.

The correct answer is option e i.e. All of the above.

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