1 UNSW MFIN6210: Final Exam – Term 2, 2021 Time allowed – You will have until 11pm on Sunday 15 August. Submit it via the submission link on Moodle. The number of marks for each question is noted on the question paper The multiple choice questions are worth 10% of the exam score. The short answer questions are worth 90% of the exam. Each short answer question is worth the amount stated in square brackets. Multiple choice [ 10% of the exam score] 1. [1 mark] Which of the following is NOT typically associated with better returns to a divestor when making a divestiture a. Selling a non-core unit b. Selling the unit to a buyer in the same industry as that unit c. Receiving cash from the sale d. None of the above e. All of the above 2. [1 mark] Which of the following is true about independent directors a. They are typically better incentivized than executive directors b. They usually have more knowledge about the company in question than other directors c. They are free from agency conflicts d. All of the above e. None of the above 3. [1 mark] Which of the following mechanisms is often used by LPs (limited partners) to deal with agency conflicts a. Hurdle rates for carry b. Equity vesting provisions c. Providing a management fee d. Two or more of the above e. None of the above 4. [1 mark] Which of the following describes the speed of adjustment in leverage models a. The speed with which the firm can compile paperwork to satisfy regulatory hurdles b. The speed with which firms respond to competitors’ actions including in their capital structure c. The speed with which the firm can respond and adjust its operations to a regulatory shock 2 d. Two or more of the above e. None of the above 5. [1 mark] Which of the following is true about overconfident CEOs a. Firms should never hire overconfident CEOs because they always destroy value b. O
verconfident CEOs tend to overestimate competitors’ prospects c. Overconfident CEOs’ firms are sued less than other firms because (for example) they can better market their firms’ positions to possible litigants d. Overconfident CEOs usually perform better than other CEOs because (for example) of their self-belief Short answer questions 1. [20% of grade] Chrono24 recently announced that it would raise EUR 100m in a Series C venture round. Suppose you are the venture consortium. Discuss what types of terms you might include in your agreement with Chrono24. Better answers will reflect on the specific information about the company and the venture literature. 2. [30% of grade] Consider the Zip IPO. a. Calculate its performance on the day of the IPO and calculate measures of post-IPO performance. b. Explain why IPOs are often underpriced in general c. Compare Zip’s IPO performance to what we would expect based on the academic literature. 3. [30% of grade] You want to examine how a firm’s divestitures have performed and what factors influence divestiture performance. a. How would you measure divestiture performance. Describe three different ways to measure performance and be specific about things such as timing of each. Justify your specifics. b. Describe three factors that influence how much the divestor gains from the divestiture and how it might influence performance. Explain why each factor influences performance in the way suggested. 2. [20% of grade] Discuss the pros and cons of dual class share structures 3 4. This question relates to empirical issues a. [4 marks] What is a difference in difference test and what econometric issue does it seek to solve When answering this question, please include an equation to indicate what you mean b. [2 marks] What is reverse causality Why is it a problem END OF EXAM