Wall Street Prep Premium Exam
• Acquirer purchases 100% of target by issuing additional stock to purchase
target shares
• No premium is offered to the current target share price
• Acquirer share price at announcement is $30
• Target share price at announcement is $50
• Acquirer EPS next year is $3.00
• Target EPS next year is $2.00
• Acquirer has 4 thousand shares outstanding
• Target has 2 thousand shares outstanding
Assuming a 40% tax rate, what are the necessary pre-tax synergies needed to
break-even? - ANS -
\• Acquirer purchases 100% of target by issuing additional stock to purchase
target shares
• No premium is offered to the current target share price
• Acquirer share price at announcement is $30
• Target share price at announcement is $50
• Acquirer EPS next year is $3.00
• Target EPS next year is $2.00
• Acquirer has 4 thousand shares outstanding
• Target has 2 thousand shares outstanding
What is the exchange ratio for the deal? - ANS - 1.7x
\a 10-q financial filing has all of the following characteristics except - ANS -
issued four times a year.
\A 338(h)(10) election: - ANS - Requires that both buyer and seller must jointly
elect to have the IRS deem the acquisition an asset sale for
tax purposes
\A company has the following information, 1. 2014 revenues of $5 billion,2013
Accounts receivable of $400 million, 2014 accounts receivable of $600 million,
what are the days sales outstanding - ANS - 36.5
\A company has the following information:
• 2013 retained earnings balance of $12 billion
• Net income of $3.5 billion in 2014
• Capex of $200 million in 2014
• Preferred dividends of $100 million in 2014
• Common dividends of $400 million in 2014
What is the retained earnings balance at the end of 2014? - ANS - 15 billion
, \A company has the following information:
• 2014 Revenues of $8 billion
• 2014 COGS of $5 billion
• 2013 Accounts receivable of $400 million
• 2014 Accounts receivable of $600 million
• 2013 Inventories of $1 billion
• 2014 Inventories of $800 million
• 2013 Accounts payable of $250 million
• 2014 Accounts payable of $300 million
What are the inventory days for the company? - ANS - 65.7 days
\A company has the following information:
• 2014 share repurchase plan of $4 billion
• Average share price of $60 for the year 2013
• Expected EPS growth for 2014 of 10%
What should the number of shares repurchased by the company be in your
financial model? - ANS - 60.6 million
\A debt holder would be primarily concerned with which of the following
multiples?
I. Enterprise (Transaction) Value / EBITDA
II. Price/Earnings
III. Enterprise (Transaction) Value / Sales - ANS - 1 and 3 only
\A debt holder would be primarily concerned with which of the following
multiples?
I. Enterprise (Transaction) Value / EBITDA
II. Price/Earnings
III. Enterprise (Transaction) Value / Sales - ANS - one and three only
\A good LBO candidate has which of the following characteristics? - ANS - Little
to no existing leverage, steady cash flows and little investment in business
through capex and working capital
\An acquisition creates shareholder value: - ANS - when a company acquires a
business whose fundamental value is higher than the purchase price
\Company A shares are currently trading at $20 per share. A survey of Wall Street
analysts reveals that EPS expectations for Company A for the full year 2014 are
$1.50 per share. Company A has 200 million diluted shares outstanding.
Company A's major competitors are trading at an average share price / 2014
Expected EPS of 15.0x.
Using the comparable company analysis valuation method, Company A shares
are: - ANS - 2.5 per share undervalued
\Company A shares are currently trading at $50 per share. A survey of Wall Street
analysts reveals that EPS expectations for Company A for the full year 2014 are
• Acquirer purchases 100% of target by issuing additional stock to purchase
target shares
• No premium is offered to the current target share price
• Acquirer share price at announcement is $30
• Target share price at announcement is $50
• Acquirer EPS next year is $3.00
• Target EPS next year is $2.00
• Acquirer has 4 thousand shares outstanding
• Target has 2 thousand shares outstanding
Assuming a 40% tax rate, what are the necessary pre-tax synergies needed to
break-even? - ANS -
\• Acquirer purchases 100% of target by issuing additional stock to purchase
target shares
• No premium is offered to the current target share price
• Acquirer share price at announcement is $30
• Target share price at announcement is $50
• Acquirer EPS next year is $3.00
• Target EPS next year is $2.00
• Acquirer has 4 thousand shares outstanding
• Target has 2 thousand shares outstanding
What is the exchange ratio for the deal? - ANS - 1.7x
\a 10-q financial filing has all of the following characteristics except - ANS -
issued four times a year.
\A 338(h)(10) election: - ANS - Requires that both buyer and seller must jointly
elect to have the IRS deem the acquisition an asset sale for
tax purposes
\A company has the following information, 1. 2014 revenues of $5 billion,2013
Accounts receivable of $400 million, 2014 accounts receivable of $600 million,
what are the days sales outstanding - ANS - 36.5
\A company has the following information:
• 2013 retained earnings balance of $12 billion
• Net income of $3.5 billion in 2014
• Capex of $200 million in 2014
• Preferred dividends of $100 million in 2014
• Common dividends of $400 million in 2014
What is the retained earnings balance at the end of 2014? - ANS - 15 billion
, \A company has the following information:
• 2014 Revenues of $8 billion
• 2014 COGS of $5 billion
• 2013 Accounts receivable of $400 million
• 2014 Accounts receivable of $600 million
• 2013 Inventories of $1 billion
• 2014 Inventories of $800 million
• 2013 Accounts payable of $250 million
• 2014 Accounts payable of $300 million
What are the inventory days for the company? - ANS - 65.7 days
\A company has the following information:
• 2014 share repurchase plan of $4 billion
• Average share price of $60 for the year 2013
• Expected EPS growth for 2014 of 10%
What should the number of shares repurchased by the company be in your
financial model? - ANS - 60.6 million
\A debt holder would be primarily concerned with which of the following
multiples?
I. Enterprise (Transaction) Value / EBITDA
II. Price/Earnings
III. Enterprise (Transaction) Value / Sales - ANS - 1 and 3 only
\A debt holder would be primarily concerned with which of the following
multiples?
I. Enterprise (Transaction) Value / EBITDA
II. Price/Earnings
III. Enterprise (Transaction) Value / Sales - ANS - one and three only
\A good LBO candidate has which of the following characteristics? - ANS - Little
to no existing leverage, steady cash flows and little investment in business
through capex and working capital
\An acquisition creates shareholder value: - ANS - when a company acquires a
business whose fundamental value is higher than the purchase price
\Company A shares are currently trading at $20 per share. A survey of Wall Street
analysts reveals that EPS expectations for Company A for the full year 2014 are
$1.50 per share. Company A has 200 million diluted shares outstanding.
Company A's major competitors are trading at an average share price / 2014
Expected EPS of 15.0x.
Using the comparable company analysis valuation method, Company A shares
are: - ANS - 2.5 per share undervalued
\Company A shares are currently trading at $50 per share. A survey of Wall Street
analysts reveals that EPS expectations for Company A for the full year 2014 are
