Question

1. What type of firm is most likely to use a LBO? (a) mature, low growth...

1. What type of firm is most likely to use a LBO?

(a) mature, low growth firm

(b) midlevel manufacturer

(c) young, biotech firm

(d) regulated firm

2. A merger between two banks would most likely be considered:

(a) a vertical merger

(b) a horizontal merger

(c) an equity carveout

(d) a spin off

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Answer #1

1.leveraged buyout should be applicable to those companies who are having a predictable cash flows and those companies are trading at a low valuations.

So it can be said that mature and low growth form is a good candidate of leveraged buyout candidate because they will have the steady cash flows.

Correct answer would be option (A) Mature,low growth.

2.merger between two bank will be considered horizontal merger because they are producing the same products and, are into the same industry

Correct answer would be option (B). Horizontal Merger.

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