M&A Exam 2 Formulas & Ratios
Questions and Answers
WACC formula ✅= Ke (E/E+D) + Kd (D/D+E) (1 - t)
CAPM (Capital Asset Pricing Model) ✅= Rf + B (Rm - Rf)
Equity Value Formula ✅= Basic Shares Outstanding + ITM Options & Warrants + ITM
Convertible Securities
Enterprise Value formula ✅= Equity Value + Total Debt + Pref Stock + Non-Controlling
Interests - Cash & Cash Equivalents
Perpetuity Growth Model ✅= FCFn ( 1+ g)/ (r-g)
Exit Multiple Method ✅= EBITDA(n) * Exit Multiple
Exchange Ratio (ER) ✅- number of acquisition shares per target share
Premium Paid ✅= Offer price per share/unaffected share price - 1
Fully Diluted Shares Outstanding ✅= # Basic Shares Outstanding + # ITM options &
warrants + # ITM convertible securities
ROE ✅Return on Equity
- measures firm's profitability in terms of stockholders' equity
- NI/Stockholders' Equity
ROA ✅Return on Assets
- how much money a company earns by putting its assets to use
- NI/Total Assets
ROIC ✅Return on Invested Capital
- measures return an investment generates for those who provided the capital - for ALL
investors
- NOPAT/Invested Capital
Profit Margin ✅- the amount by which revenue from sales exceeds costs in a business.
- NI/Sales (or Revenue)
Dividend Yield ✅- estimate of dividend only return of a stock investment
Questions and Answers
WACC formula ✅= Ke (E/E+D) + Kd (D/D+E) (1 - t)
CAPM (Capital Asset Pricing Model) ✅= Rf + B (Rm - Rf)
Equity Value Formula ✅= Basic Shares Outstanding + ITM Options & Warrants + ITM
Convertible Securities
Enterprise Value formula ✅= Equity Value + Total Debt + Pref Stock + Non-Controlling
Interests - Cash & Cash Equivalents
Perpetuity Growth Model ✅= FCFn ( 1+ g)/ (r-g)
Exit Multiple Method ✅= EBITDA(n) * Exit Multiple
Exchange Ratio (ER) ✅- number of acquisition shares per target share
Premium Paid ✅= Offer price per share/unaffected share price - 1
Fully Diluted Shares Outstanding ✅= # Basic Shares Outstanding + # ITM options &
warrants + # ITM convertible securities
ROE ✅Return on Equity
- measures firm's profitability in terms of stockholders' equity
- NI/Stockholders' Equity
ROA ✅Return on Assets
- how much money a company earns by putting its assets to use
- NI/Total Assets
ROIC ✅Return on Invested Capital
- measures return an investment generates for those who provided the capital - for ALL
investors
- NOPAT/Invested Capital
Profit Margin ✅- the amount by which revenue from sales exceeds costs in a business.
- NI/Sales (or Revenue)
Dividend Yield ✅- estimate of dividend only return of a stock investment
