What is the classification of a covenant that requires to buyer to maintain a minimum
EBITDA?
A. Affirmative
B. Negative
C. Maintenance
D. Financial
Revenue synergies tend to be more _______ than cost synergies.
A. Safe
B. Speculative
C. Dependable
D. Conservative
Calculate the CAPM given the following information.
A. 12%
B. 16%
C. 20%
D. 8.32%
Given the following
information, what is the
total amount that has been
drawn from the revolver?
Details:
Revolver: $100.0m
Term: 3 years
Annual commitment fee: 30 bps
Cash available for optional debt repayment:
Year 1: $40.0m
Year 2: $35.0m
Year 3: $32.0m
A. $100.0m
B. $30.0m
C. $107.0m
D. Revolver remains undrawn
What is EBITDA a proxy for?
A. Sales
B. Growth
C. Cash flow
D. Debt
Calculate net interest expense given the following information.
Details:
Total interest expense: $25.0m
Interest income: $2.0m
Non-cash deferred financing fees: $3.0m
A. $23.0m
B. $20.0m
C. $26.0m
D. $30.0m
In a floating ratio structure, the number of shares exchanged fluctuates in accordance
with which of the following?
A. Movement of the acquirer’s share price
B. Movement of the target’s share price
C. Market movement
D. Sector movement
What happens to WAAC as the proportion of debt in a capital structure increases?
A. It stays the same
B. It decreases
C. It increases
D. It depends
Which of the following provides an overview of the LBO analysis in a user-friendly
format?
A. CIM
B. Transaction summary
C. Sensitivity analysis
D. Debt schedule
Investment banks typically compete to provide a financing in an LBO, the legally
binding letters are called?
A. Commitment papers
B. Revolver
C. Financing papers
D. Both A and C
When is goodwill created?
A. Purchase price exceeds the net identifiable assets
B. Acquirer’s P/E is higher than target’s
C. Purchase price exceeds the net identifiable assets
D. Acquirer’s P/E is lower than target’s
What is the classification of a covenant requiring a borrower to maintain assets,
collateral, or other securities?
A. Affirmative
B. Negative
C. Maintenance
D. Financial
What kind of loan is needed if the “take-out” securities deteriorate between the signing
and the closing of an LBO?
A. Bridge loan
B. Second lien term loan
C. PIK
D. Mezzanine debt
What is used to calculate the expected return on a company’s equity?
A. FCF
B. CAPM
C. DCM
D. EEM
In a pre-LBO model, net income on the first line of the cash flow statement is initially:
A. Inflated
B. Understated
C. Correct
D. Deflated
A DCF analysis is premised on the principle that the value of a company can be derived
from the present value of which of the following?
A. Revenues
B. Gross profits
C. Free cash flow
D. Net working capital
Which of the following is both a pro and a con of performing a comparable companies
analysis?
A. It is quick to perform
B. It is current data
C. It is relative to other companies
D. It is market based
Which structure generally gives greater certainty to the target’s shareholders in terms of
value received?
A. Floating exchange ratio
B. Fixed exchange ratio
C. They both are the same
D. It depends on the terms
Which of the following is considered a use of cash?
A. Amortization
B. Depreciation
C. Decrease in net working capital
D. Increase in net working capital
When performing a precedent transaction analysis, in what scenario would information
be found in an S-4 if the target was private in an LBO?
A. When non-public financing is used
B. When public debt securities are issued
C. If the acquisition is over $1,000.0m
D. There is never information on a private transaction
How should one adjust net income when using the If-Converted method for a
comparable companies analysis?
A. Adjust net income downward
B. Adjust net income upward
C. Make no adjustment to net income
D. It depends
What is the equity value of the company given the following information?
• Current share price: $40.00
• Basic shares outstanding: 400.0mm
• 50.0mm options outstanding with an exercise price of $20.00
• 5.0mm warrants with an exercise price of $45.00
A. $1,600.0mm
B. $1,500.0mm
C. $1,700.0mm
D. $1,625.0mm
Given the following information, calculate the cash available for optional debt
repayment.
Details:
Cash flow from investing activities: $50.0
Cash flow from operating activities: $125.0
Total mandatory debt repayment: $30.0
Cash from balance sheet: $20.0
A. $65.0
B. $165.0
C. $45
D. $20.0
An all-debt financing structure is typically:
A. The most dilutive
B. The most accretive
C. Optimal
D. Balanced
Which form of consideration typically triggers a taxable event?
A. All-cash
B. Stock-for-Stock
C. Cash/stock mix
D. None
All of the following are advantages of which auction type?
Heightens competitive dynamics
Limits potential buyers’ negotiating leverage
Reduces potential business disruption
A. Broad auction
B. Targeted auction
C. Negotiated sale
D. None of the above
Calculate the total goodwill for a pro forma balance sheet given the following details.
Details:
Equity purchase price: $2,000
Book value: $1,700
Existing goodwill: $100
A. $100
B. $300
C. $200
D. $400
A(n) __________ is often initiated by the buyer.
A. Asset sale
B. Negotiated sale
C. Targeted auction
D. Broad auction
Calculate the percentage of premium paid given the following details:
Details:
Although rumors of the transaction leaked out yesterday, AcquirerCo officially
announced today that it has agreed to buy TargetCo for $25.00 a share. TargetCo shares
closed higher yesterday at $20.00.
A. 25%
B. 20%
C. 15%
D. Not enough information
Calculate the unlevered beta given the following information.
A. 1.8
B. 1.2
C. 1
D. 1.4
When performing a returns analysis in
an LBO, which method does not include
the time value of money?
A. IRR
B. DCF
C. Cash return analysis
D. Perpetuity growth method
