ADVENTIS FMC LEVEL 2 FINAL EXAM WITH ANSWERS
1. what is value what people are willing to pay
for (what the buyer pays)
2. who said, "Value is what people are willing John Naisbitt
to pay for"
3. 2 primary types of valuation 1. relative valuation
2. intrinsic valuation
4. relative valuation refers to what methods that compare the
price of a company to the
market value of similar assets
5. intrinsic value refers to what the value of a company
through fundamental analysis
without reference to its mar-
ket value but instead around
its ability to generate cash
flow
6. in an M&A context, what is EV transaction value
7. in an M&A context, what is equity value purchase price
8. a company sold for $100M and the company - the $2M would be used by
being bought had $15M of debt and $2M of shareholders of the acquired
cash, what happens and what is the trans- company to pay down existing
action value and purchase price $15M in debt to make $13M in
debt now (15 - 2 = 13)
- the proceeds from the deal
would then be used to pay
down the remaining debt (EV
= CS + PS + Debt - Cash)
- Result is 100 - 13 = 87
- TV = $100M
- Purchase price = $87 (check
to shareholders of acquired
company)
9. 2 primary types of relative valuation
1/9
, ADVENTIS FMC LEVEL 2 FINAL EXAM WITH ANSWERS
1. comparable company
analysis
2. acquisition comparables
analysis
10. comparable companies analyses (public - most common types of rela-
trading comparables analyses) tive valuation
- these methods allow in-
vestors to compare valuation
of similar companies by com-
paring similar ratios
11. most common public trading comparable 1. EV/EBITDA
ratios 2. EV/Revenue
3. Net income/Earnings
(share price/earnings per
share)
12. assume a company has $5M of EBITDA and - Ex: 7.0 = x/5 ; 6.0 = x/5
two public companies most similar to the - can conclude that EV for the
company trade at 6.0x and 7.0x EBITDA, company should be between
what might you conclude 30-35 million
13. what happens when a company trades at a investors will dig in to under-
multiple that is a premium or a discount to stand the rationale
the industry average
14. assume that a company trades at 7.0x EBIT- the company is being under-
DA but the average of comparable compa- valued and the investor will
nies is 9.0x, what can we conclude look to buy shares because
he realizes that the share
price will increase Wall St. be-
gins to value the company
in-line with its peers
15. acquisition comparables analysis (transac- represent comparable acqui-
tion comparables analysis) sitions that have taken place
and have been publicly an-
nounced
2/9
1. what is value what people are willing to pay
for (what the buyer pays)
2. who said, "Value is what people are willing John Naisbitt
to pay for"
3. 2 primary types of valuation 1. relative valuation
2. intrinsic valuation
4. relative valuation refers to what methods that compare the
price of a company to the
market value of similar assets
5. intrinsic value refers to what the value of a company
through fundamental analysis
without reference to its mar-
ket value but instead around
its ability to generate cash
flow
6. in an M&A context, what is EV transaction value
7. in an M&A context, what is equity value purchase price
8. a company sold for $100M and the company - the $2M would be used by
being bought had $15M of debt and $2M of shareholders of the acquired
cash, what happens and what is the trans- company to pay down existing
action value and purchase price $15M in debt to make $13M in
debt now (15 - 2 = 13)
- the proceeds from the deal
would then be used to pay
down the remaining debt (EV
= CS + PS + Debt - Cash)
- Result is 100 - 13 = 87
- TV = $100M
- Purchase price = $87 (check
to shareholders of acquired
company)
9. 2 primary types of relative valuation
1/9
, ADVENTIS FMC LEVEL 2 FINAL EXAM WITH ANSWERS
1. comparable company
analysis
2. acquisition comparables
analysis
10. comparable companies analyses (public - most common types of rela-
trading comparables analyses) tive valuation
- these methods allow in-
vestors to compare valuation
of similar companies by com-
paring similar ratios
11. most common public trading comparable 1. EV/EBITDA
ratios 2. EV/Revenue
3. Net income/Earnings
(share price/earnings per
share)
12. assume a company has $5M of EBITDA and - Ex: 7.0 = x/5 ; 6.0 = x/5
two public companies most similar to the - can conclude that EV for the
company trade at 6.0x and 7.0x EBITDA, company should be between
what might you conclude 30-35 million
13. what happens when a company trades at a investors will dig in to under-
multiple that is a premium or a discount to stand the rationale
the industry average
14. assume that a company trades at 7.0x EBIT- the company is being under-
DA but the average of comparable compa- valued and the investor will
nies is 9.0x, what can we conclude look to buy shares because
he realizes that the share
price will increase Wall St. be-
gins to value the company
in-line with its peers
15. acquisition comparables analysis (transac- represent comparable acqui-
tion comparables analysis) sitions that have taken place
and have been publicly an-
nounced
2/9
