Here is part of a copy of a final exam

...from a previous year. Don't assume that they studied exactly what we did, by no means was that the case.


1. “Exclusive territories” arise when a franchise is given license to operate, provided it is not too close geographically to another franchise. McDonald’s uses this practice, I believe. Write and answer your own analytical question about exclusive territories. You will be graded on the quality of the question as much as on your answer. Pick a question that allows for rich and analytical answers.

2. Corporate takeovers are less common in most countries than in the U.S.. Why might this be? What are the advantages and disadvantages of relying so much on takeovers to improve corporate performance?

3. One recent proposal is to take the hard-to-value mortgage assets on the books of many banks and package them into new, bundled form. Imagine the government buying up these complex mortgage securities, bundling hundreds or thousands of them together, and then selling equity in the resulting bundles. In essence the government is creating new “corporations” which do little other than receive mortgage payments.

Under what theory of the world would this help the financial crisis? But does it matter at all? What are the conditions under which this could help solve the problem? Exactly which problem would it be solving? If it matters, which assumption(s) from the Modigliani-Miller theorem is in this case failing to hold?