1. What are some reasons why a horizontal merger might create value for shareholders?

A. Horizontal mergers are more likely to create value for acquiring shareholders.

B. Horizontal mergers combine two firms in the same industry.

C. Horizontal mergers combine two firms in dissimilar industries.

D. A horizontal merger provides for greater potential synergies in eliminating redundant functions within the two firms and potentially increased pricing power with both vendors and customers.

2. Berkeley Inc. just paid an annual dividend of $1.2. Their dividends are expected to increase by 4% annually. Berkeley Inc. stock is selling for $25 a share. What is the required rate of return on this stock implied by the dividend-growth model?

4.00%

8.99%

10.50%

11.00%