Transaction Comps and LBO Modeling Exam – Wall
Street Prep – 2025/2026 Edition – Questions and
Correct Answers
Section 1: Transaction Comps Fundamentals (Q1–Q25)
1. What is the primary purpose of transaction comps analysis?
A. To forecast future revenue growth
B. To benchmark valuation using past M&A deals
C. To calculate a company's WACC
D. To prepare a tax provision
Answer: B
Rationale: Transaction comps (precedent transaction analysis) values a company by analyzing
the valuation multiples paid in comparable M&A transactions. It benchmarks what acquirers
have historically paid for similar businesses.
2. Which metric is most commonly used in transaction comps?
A. Price-to-Earnings (P/E)
B. Enterprise Value to EBITDA (EV/EBITDA)
C. Price-to-Book (P/B)
D. Dividend Yield
Answer: B
Rationale: EV/EBITDA is the most commonly used multiple in transaction comps because it is
capital-structure neutral and allows comparison across companies with different debt levels.
3. What is the key difference between trading comps and transaction comps?
A. Trading comps use public market prices; transaction comps use M&A deal prices
B. Trading comps are for private companies; transaction comps are for public companies
C. Trading comps include a control premium; transaction comps do not
D. Trading comps use historical data; transaction comps use forward estimates only
Answer: A
Rationale: Trading comps use current public market valuations, while transaction comps use
the prices paid in actual M&A transactions, which typically include a control premium.
4. What is a "control premium" in transaction comps?
A. The premium paid by an acquirer above the target's current market price
B. The premium paid for a controlling interest in a company
C. The premium charged by investment banks for advisory services
D. The premium paid for voting shares versus non-voting shares
,Answer: B
Rationale: A control premium is the amount an acquirer pays above the target's current market
value to gain control of the company, reflecting the value of synergies and control rights.
5. Which of the following is NOT a typical step in transaction comps analysis?
A. Identify comparable transactions
B. Calculate transaction multiples
C. Build a DCF model
D. Apply multiples to the target's metrics
Answer: C
Rationale: Building a DCF model is part of a DCF analysis, not transaction comps. Transaction
comps involves identifying deals, calculating multiples, and applying them to the target.
6. When selecting comparable transactions, which factor is MOST important?
A. The size of the transaction
B. The industry and business model similarity
C. The geographic location of the acquirer
D. The date of the transaction announcement
Answer: B
Rationale: Industry and business model similarity is the most critical factor because the
multiple must reflect the target's operating characteristics to be meaningful.
7. What does EV/Revenue multiple measure?
A. How much value is attributed to each dollar of revenue
B. The profitability of a company
C. The debt capacity of a company
D. The tax efficiency of a company
Answer: A
Rationale: EV/Revenue measures the total enterprise value per dollar of revenue, often used
for high-growth or unprofitable companies.
**8. A target company has EBITDA of $50M. Comparable transactions have a median
EV/EBITDA multiple of 8.5x. What is the implied enterprise value?**
A. $375M
B. $425M
C. $475M
D. $500M
Answer: B
Rationale: EV = EBITDA × EV/EBITDA multiple = $50M × 8.5 = $425M.
,9. Why are transaction multiples typically higher than trading multiples?
A. Transaction multiples include control premiums and synergies
B. Transaction multiples are based on forward estimates
C. Transaction multiples are based on historical data
D. Transaction multiples exclude minority interests
Answer: A
Rationale: Transaction multiples are higher because they include the control premium and
expected synergies that the acquirer anticipates realizing from the transaction.
10. Which of the following is a limitation of transaction comps analysis?
A. It requires a DCF model
B. Historical transaction data may not reflect current market conditions
C. It cannot be used for private companies
D. It ignores revenue growth
Answer: B
Rationale: A key limitation is that historical transaction data may not reflect current market
conditions, as market sentiment, interest rates, and industry dynamics change over time.
11. A company has 100 million shares outstanding, net debt of $200M, and EBITDA of $80M.
Comparable transactions average 9.0x EV/EBITDA. What is the implied equity value per
share?
A. $7.20
B. $8.20
C. $9.20
D. $10.20
Answer: A
Rationale: EV = $80M × 9.0 = $720M. Equity Value = EV - Net Debt = $720M - $200M = $520M.
Per share = $520M / 100M = $5.20. Wait, that's not matching. Let me recalculate: EV = 80 × 9 =
720. Equity = 720 - 200 = 520. Per share = 520/100 = $5.20. This doesn't match any option. Let
me check: 100 million shares, net debt $200M, EBITDA $80M, multiple 9.0x. EV = 720. Equity =
520. Per share = 5.20. None of the options match. Let me recalculate the question. Perhaps the
multiple should be different. Actually, looking at the options, $7.20 would imply equity value of
$720M, which would be EV = 920M, so multiple = 920/80 = 11.5x. Not matching. I'll adjust the
question to make it work. Let me use EBITDA = $80M, multiple = 9.0x, EV = 720M, net debt =
$200M, equity = 520M, shares = 100M, per share = $5.20. But that's not an option. I'll change
the net debt to $100M, then equity = 620M, per share = $6.20. Still not matching. I'll change the
multiple to 10.0x, EV = 800M, equity = 600M, per share = $6.00. Still not matching. I'll change
the EBITDA to $90M, EV = 810M, equity = 610M, per share = $6.10. Hmm. Let me just make the
question simpler. I'll ask for the implied enterprise value instead. Let me revise Q11.
, 11. A company has net debt of $200M and EBITDA of $80M. Comparable transactions average
9.0x EV/EBITDA. What is the implied equity value?
A. $520M
B. $620M
C. $720M
D. $820M
Answer: A
Rationale: EV = $80M × 9.0 = $720M. Equity Value = EV - Net Debt = $720M - $200M = $520M.
12. What is the formula for calculating transaction equity value?
A. Enterprise Value + Net Debt
B. Enterprise Value - Net Debt
C. EBITDA × Multiple + Net Debt
D. Revenue × Multiple - Net Debt
Answer: B
Rationale: Equity Value = Enterprise Value - Net Debt, where Net Debt = Total Debt - Cash.
13. Which multiple is most appropriate for valuing a company with negative EBITDA?
A. EV/EBITDA
B. P/E
C. EV/Revenue
D. EV/EBIT
Answer: C
Rationale: EV/Revenue is appropriate for companies with negative EBITDA because revenue is
positive even when earnings are negative.
14. What does a transaction comps analysis typically include in the "football field" valuation?
A. Only the DCF valuation
B. A range of valuations from different methodologies
C. Only the transaction comps valuation
D. Only the trading comps valuation
Answer: B
Rationale: A "football field" chart displays a range of valuations from multiple methodologies,
including DCF, trading comps, transaction comps, and LBO analysis.
15. In transaction comps, why is it important to use the target's forward financials?
A. Forward financials are more accurate than historical
B. Forward financials reflect the expected future performance at the time of the transaction
C. Historical financials are not available
D. Forward financials are required by accounting standards
Street Prep – 2025/2026 Edition – Questions and
Correct Answers
Section 1: Transaction Comps Fundamentals (Q1–Q25)
1. What is the primary purpose of transaction comps analysis?
A. To forecast future revenue growth
B. To benchmark valuation using past M&A deals
C. To calculate a company's WACC
D. To prepare a tax provision
Answer: B
Rationale: Transaction comps (precedent transaction analysis) values a company by analyzing
the valuation multiples paid in comparable M&A transactions. It benchmarks what acquirers
have historically paid for similar businesses.
2. Which metric is most commonly used in transaction comps?
A. Price-to-Earnings (P/E)
B. Enterprise Value to EBITDA (EV/EBITDA)
C. Price-to-Book (P/B)
D. Dividend Yield
Answer: B
Rationale: EV/EBITDA is the most commonly used multiple in transaction comps because it is
capital-structure neutral and allows comparison across companies with different debt levels.
3. What is the key difference between trading comps and transaction comps?
A. Trading comps use public market prices; transaction comps use M&A deal prices
B. Trading comps are for private companies; transaction comps are for public companies
C. Trading comps include a control premium; transaction comps do not
D. Trading comps use historical data; transaction comps use forward estimates only
Answer: A
Rationale: Trading comps use current public market valuations, while transaction comps use
the prices paid in actual M&A transactions, which typically include a control premium.
4. What is a "control premium" in transaction comps?
A. The premium paid by an acquirer above the target's current market price
B. The premium paid for a controlling interest in a company
C. The premium charged by investment banks for advisory services
D. The premium paid for voting shares versus non-voting shares
,Answer: B
Rationale: A control premium is the amount an acquirer pays above the target's current market
value to gain control of the company, reflecting the value of synergies and control rights.
5. Which of the following is NOT a typical step in transaction comps analysis?
A. Identify comparable transactions
B. Calculate transaction multiples
C. Build a DCF model
D. Apply multiples to the target's metrics
Answer: C
Rationale: Building a DCF model is part of a DCF analysis, not transaction comps. Transaction
comps involves identifying deals, calculating multiples, and applying them to the target.
6. When selecting comparable transactions, which factor is MOST important?
A. The size of the transaction
B. The industry and business model similarity
C. The geographic location of the acquirer
D. The date of the transaction announcement
Answer: B
Rationale: Industry and business model similarity is the most critical factor because the
multiple must reflect the target's operating characteristics to be meaningful.
7. What does EV/Revenue multiple measure?
A. How much value is attributed to each dollar of revenue
B. The profitability of a company
C. The debt capacity of a company
D. The tax efficiency of a company
Answer: A
Rationale: EV/Revenue measures the total enterprise value per dollar of revenue, often used
for high-growth or unprofitable companies.
**8. A target company has EBITDA of $50M. Comparable transactions have a median
EV/EBITDA multiple of 8.5x. What is the implied enterprise value?**
A. $375M
B. $425M
C. $475M
D. $500M
Answer: B
Rationale: EV = EBITDA × EV/EBITDA multiple = $50M × 8.5 = $425M.
,9. Why are transaction multiples typically higher than trading multiples?
A. Transaction multiples include control premiums and synergies
B. Transaction multiples are based on forward estimates
C. Transaction multiples are based on historical data
D. Transaction multiples exclude minority interests
Answer: A
Rationale: Transaction multiples are higher because they include the control premium and
expected synergies that the acquirer anticipates realizing from the transaction.
10. Which of the following is a limitation of transaction comps analysis?
A. It requires a DCF model
B. Historical transaction data may not reflect current market conditions
C. It cannot be used for private companies
D. It ignores revenue growth
Answer: B
Rationale: A key limitation is that historical transaction data may not reflect current market
conditions, as market sentiment, interest rates, and industry dynamics change over time.
11. A company has 100 million shares outstanding, net debt of $200M, and EBITDA of $80M.
Comparable transactions average 9.0x EV/EBITDA. What is the implied equity value per
share?
A. $7.20
B. $8.20
C. $9.20
D. $10.20
Answer: A
Rationale: EV = $80M × 9.0 = $720M. Equity Value = EV - Net Debt = $720M - $200M = $520M.
Per share = $520M / 100M = $5.20. Wait, that's not matching. Let me recalculate: EV = 80 × 9 =
720. Equity = 720 - 200 = 520. Per share = 520/100 = $5.20. This doesn't match any option. Let
me check: 100 million shares, net debt $200M, EBITDA $80M, multiple 9.0x. EV = 720. Equity =
520. Per share = 5.20. None of the options match. Let me recalculate the question. Perhaps the
multiple should be different. Actually, looking at the options, $7.20 would imply equity value of
$720M, which would be EV = 920M, so multiple = 920/80 = 11.5x. Not matching. I'll adjust the
question to make it work. Let me use EBITDA = $80M, multiple = 9.0x, EV = 720M, net debt =
$200M, equity = 520M, shares = 100M, per share = $5.20. But that's not an option. I'll change
the net debt to $100M, then equity = 620M, per share = $6.20. Still not matching. I'll change the
multiple to 10.0x, EV = 800M, equity = 600M, per share = $6.00. Still not matching. I'll change
the EBITDA to $90M, EV = 810M, equity = 610M, per share = $6.10. Hmm. Let me just make the
question simpler. I'll ask for the implied enterprise value instead. Let me revise Q11.
, 11. A company has net debt of $200M and EBITDA of $80M. Comparable transactions average
9.0x EV/EBITDA. What is the implied equity value?
A. $520M
B. $620M
C. $720M
D. $820M
Answer: A
Rationale: EV = $80M × 9.0 = $720M. Equity Value = EV - Net Debt = $720M - $200M = $520M.
12. What is the formula for calculating transaction equity value?
A. Enterprise Value + Net Debt
B. Enterprise Value - Net Debt
C. EBITDA × Multiple + Net Debt
D. Revenue × Multiple - Net Debt
Answer: B
Rationale: Equity Value = Enterprise Value - Net Debt, where Net Debt = Total Debt - Cash.
13. Which multiple is most appropriate for valuing a company with negative EBITDA?
A. EV/EBITDA
B. P/E
C. EV/Revenue
D. EV/EBIT
Answer: C
Rationale: EV/Revenue is appropriate for companies with negative EBITDA because revenue is
positive even when earnings are negative.
14. What does a transaction comps analysis typically include in the "football field" valuation?
A. Only the DCF valuation
B. A range of valuations from different methodologies
C. Only the transaction comps valuation
D. Only the trading comps valuation
Answer: B
Rationale: A "football field" chart displays a range of valuations from multiple methodologies,
including DCF, trading comps, transaction comps, and LBO analysis.
15. In transaction comps, why is it important to use the target's forward financials?
A. Forward financials are more accurate than historical
B. Forward financials reflect the expected future performance at the time of the transaction
C. Historical financials are not available
D. Forward financials are required by accounting standards
