FIN 13292

subject Type Homework Help
subject Pages 9
subject Words 2523
subject Authors Joshua Pearl

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page-pf1
Given the following information, calculate the gross profit margin.
• Revenue: $200.0mm
• COGS: $100.0mm
• Operating Expenses: $50.0mm
A. 40%
B. 50%
C. 25%
D. 10%
If a computer manufacturer purchases a semiconductor company, what form of
integration is this?
A. Horizontal integration
B. Vertical integration
C. Backward integration
D. Forward integration
Which of the following may be an advantage of a pursuing a strategic buyer in the
M&A process?
A. Less financing risk
B. Operating leverage
page-pf2
C. Ability to realize synergies
D. Both A and C
When determining a terminal value for a cyclical company, the banker must make sure
that:
A. Earnings are normalized
B. Earnings are at a cyclical high
C. Earnings are at a cyclical low
D. The perpetuity growth method is used
In a traditional LBO analysis, it is common practice to assume an exit multiple that is:
A. Below the entry multiple
B. Above the entry multiple
C. Equal to the entry multiple
D. Both A and C
page-pf3
In a football field graphic for an M&A transaction, which of the following is a proxy for
what a financial buyer would be willing to pay for the company?
A. Precedent transactions analysis
B. DCF
C. LBO
D. Comparable companies analysis
Which of the following are sources of funds?
I. Term loan
II. Repayment of term loan
III. Purchase of equity
IV. Cash on hand
A. I only
B. I and IV
C. I and II
D. All are sources of funds
Calculate the company’s free cash flow given the following information.
A. $250.0mm
B. $340.0mm
C. $500.0mm
D. $300.0mm
page-pf4
Based on Moody’s rating scale, what grade is Baa1 considered?
A. High quality
B. Highly speculative
C. Medium grade
D. Extremely speculative
Acquirer share price volatility after a deal is announced is a reason why a target’s
shareholders may find:
A. Equity financing less desirable
B. Debt financing less desirable
C. Equity financing more desirable
D. A mix of debt and equity financing is less desirable
All of the following are ways to improve operational efficiencies EXCEPT:
A. Lower corporate overhead
B. Streamline operations
C. Increase marketing efforts
D. Reduce head count
page-pf5
When evaluating strategic buyers, which of the following should be taken into
consideration?
A. Financial capacity
B. Sector expertise
C. Investment strategy
D. Both A and B
Which of the following in a buy-side M&A transaction employs analysis at different
prices to help analyze and frame valuation?
A. Football field
B. AVP
C. Contribution analysis
D. Consequences analysis
In a(n) __________, the target survives the transaction and may choose to either
continue operations or dissolve after distributing the proceeds from the sale to its equity
holders.
A. Asset sale
B. Stock sale
page-pf6
C. Fire sale
D. None of the above
Calculate the offer price per share for a company in an all-cash transaction given the
following information.
Transaction Details:
Cash offer price: $300.00mm
Shares outstanding: 5.00mm
Current share price $30.00
A. $60.00
B. $10.00
C. $6.00
D. $30.00
When building a pre-LBO model, a banker builds the cash flow statement through what
point?
A. Operating activities
B. Financing activities
C. Investing activities
D. The cash flow statement is not built in the pre-LBO model
page-pf7
Calculate the present value of FCF using a year-end discount factor given the following
information.
A. $180.0m
B. $200.0m
C. $185.0mm
D. $190.0m
Capex is expensed over its useful life through which of the following?
A. Depreciation
B. Amortization
C. EBIAT
D. Goodwill
page-pf8
What is the main source of financing in a leveraged buyout?
A. Debt
B. Equity
C. Assets
D. Cash
Which variable generally represents the majority of a DCF valuation?
A. CAPM
B. Beta
C. WAAC
D. Terminal value
In an LBO model, which scenario is considered the most conservative?
A. Management case
B. Base case
C. Sponsor case
D. Downside case
page-pf9
Which calculation measures the return generated by all capital provided to a company?
A. ROE
B. ROA
C. ROIC
D. ROI
All of the following are reasons why M&A activity tends increase in strong economic
times EXCEPT:
A. High management confidence
B. Financing is readily available
C. Companies have excess cash
D. Companies focus on fortifying their balance sheets
page-pfa
Calculate the share dilution using the TSM method given the following information:
• 100.0mm basic shares outstanding
• Current share price of $10.00
• 10.0mm options outstanding with an exercise price of $20.00
A. 110.0mm
B. 150.0mm
C. 100.0mm
D. 220.0mm
All of the following are reasons why EBITDA is an important metric when performing
a comparable companies analysis EXCEPT:
I. It represents a more accurate look at a company’s operating cash flow
II. It is free from differences resulting from capital structure
III. It represents the profit after all of a company’s expenses have been netted out
IV. It is free from differences in tax expenses
A. It represents a more accurate look at a company’s operating cash flow
B. It is free from differences resulting from capital structure
C. It represents the profit after all of a company’s expenses have been netted out
D. It is free from differences in tax expenses
page-pfb
Stapled financing is a(n):
A. Optimal financing structure
B. Customized financing structure
C. Pre-packaged financing structure
D. None of the above
What is the annual interest rate paid on a debt obligation’s principal amount outstanding
called?
A. Covenant
B. Coupon
C. Call premium
D. PIK
Given the following information, calculate the EBITDA multiple that includes
synergies.
Details:
Enterprise Value: $3,500.0
EBIT: $425.0
Depreciation and Amortization: $25.0
COGS: $500.0
Synergies: $50.0
A. 3.5x
B. 8x
C. 14x
D. 7x
page-pfc
What situation would generally result in a lower purchase price of a company?
A. The seller is in need of cash and is selling a non-core business
B. The target company is shopped to prospective buyers through an auction
C. The target company is seeking alternatives to a hostile bid
D. The buyer seeks to create synergies
Calculate the percentage of premium paid given the following details.
Details:
AcquirerCo officially announced today that it has agreed to buy TargetCo for $35 a
share. TargetCo shares closed yesterday at $20.00.
A. 75%
B. 175%
C. 42%
D. 35%
page-pfd
Which of the following is performed during the first stage of the auction process?
A. Prepare confidentiality agreement
B. Contact prospective buyers
C. Receive board approval
D. Conduct management presentation
All of the following are primary classifications of covenants EXCEPT:
A. Affirmative
B. Negative
C. Maintenance
D. Financial
What is the difference between 2011 YTD revenues and LTM revenues?
Revenues:
• Q1 2011: $200.0m
• Q2 2011: $150.0m
• Q3 2011: $220.0m
• Q4 2011: $175.0m
• Q1 2012: $250.0m
• Q2 2012: $175.0m
A. $75.0m
B. $50.0m
page-pfe
C. $175.0m
D. $100.0m
Which of the following is performed during the final stage of the auction process?
A. Select winning bidder
B. Distribute final bid procedures letter and draft definitive agreement
C. Financing
D. Contact prospective buyers

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