M&A MODELING EXAM ANSWERS FROM
WALL STREET PREP CERTIFICATION
EVALUATION EXAMS 2026 SOLVED
QUESTIONS AND SOLUTIONS GRADED A+
⩥ What is the risk-free rate typically used in CAPM? Answer: The risk-
free rate is typically the 10-year Treasury yield.
⩥ What does Beta measure in finance? Answer: Beta measures the
stock's volatility relative to the market.
⩥ What is the market risk premium usually? Answer: The market risk
premium is usually 5-7%.
⩥ How do you calculate Enterprise Value (EV) for a company? Answer:
EV = EBITDA × EBITDA Multiple.
⩥ How do you calculate EBITDA? Answer: EBITDA = Revenue ×
EBITDA Margin.
⩥ What is the formula for calculating Enterprise Value when given
deferred revenue? Answer: Enterprise Value = Market Cap + Debt -
Cash + Deferred Revenue.
, ⩥ What is the preferred P/E ratio in an M&A deal, 15x or 10x, and why?
Answer: The preferred candidate is the 10x P/E because it indicates
better value for the acquirer.
⩥ What are the advantages of financing with cash in an acquisition?
Answer: Cash financing has no dilution to existing shareholders, is a
cleaner transaction, provides tax benefits for the seller, and signals a
strong balance sheet.
⩥ What are the advantages of financing with stock in an acquisition?
Answer: Stock financing preserves cash for operations, shares upside
with target shareholders, and allows for larger deals.
⩥ What are the three main valuation methods? Answer: 1. Comparable
Company Analysis (Trading Comps) 2. Precedent Transaction Analysis
(Deal Comps) 3. Discounted Cash Flow (DCF).
⩥ Which valuation method typically produces the highest valuation?
Answer: Precedent Transaction Analysis typically produces the highest
valuation due to control premiums.
⩥ What is the formula for calculating Free Cash Flow (FCF)? Answer:
FCF = EBIT(1-Tax Rate) + D&A - CapEx - Δ NWC.
WALL STREET PREP CERTIFICATION
EVALUATION EXAMS 2026 SOLVED
QUESTIONS AND SOLUTIONS GRADED A+
⩥ What is the risk-free rate typically used in CAPM? Answer: The risk-
free rate is typically the 10-year Treasury yield.
⩥ What does Beta measure in finance? Answer: Beta measures the
stock's volatility relative to the market.
⩥ What is the market risk premium usually? Answer: The market risk
premium is usually 5-7%.
⩥ How do you calculate Enterprise Value (EV) for a company? Answer:
EV = EBITDA × EBITDA Multiple.
⩥ How do you calculate EBITDA? Answer: EBITDA = Revenue ×
EBITDA Margin.
⩥ What is the formula for calculating Enterprise Value when given
deferred revenue? Answer: Enterprise Value = Market Cap + Debt -
Cash + Deferred Revenue.
, ⩥ What is the preferred P/E ratio in an M&A deal, 15x or 10x, and why?
Answer: The preferred candidate is the 10x P/E because it indicates
better value for the acquirer.
⩥ What are the advantages of financing with cash in an acquisition?
Answer: Cash financing has no dilution to existing shareholders, is a
cleaner transaction, provides tax benefits for the seller, and signals a
strong balance sheet.
⩥ What are the advantages of financing with stock in an acquisition?
Answer: Stock financing preserves cash for operations, shares upside
with target shareholders, and allows for larger deals.
⩥ What are the three main valuation methods? Answer: 1. Comparable
Company Analysis (Trading Comps) 2. Precedent Transaction Analysis
(Deal Comps) 3. Discounted Cash Flow (DCF).
⩥ Which valuation method typically produces the highest valuation?
Answer: Precedent Transaction Analysis typically produces the highest
valuation due to control premiums.
⩥ What is the formula for calculating Free Cash Flow (FCF)? Answer:
FCF = EBIT(1-Tax Rate) + D&A - CapEx - Δ NWC.
