WALL STREET PREP PREMIUM EXAM | ALL
QUESTIONS AND CORRECT ANSWERS |
GRADED A+ | VERIFIED ANSWERS | LATEST
VERSION (JUST RELEASED)
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: ------CORRECT ANSWER---------------2.5 per share
undervalued
When looking to do a transaction comp analysis, some of the merger-
related filings that should be looked at include each of the following except:
------CORRECT ANSWER---------------Form s-1
when determining value for a company based on transaction rather than
trading comps, one of the key differences that will affect the value is ------
CORRECT ANSWER---------------premium paid for control of the business
Garth's Micro Brewery, whose shares are currently trading at $40 per
share, is considering acquiring Wayne's
Beer Bottling Co. You have compiled a group of comparable transactions
within the beer bottling space and have
calculated that since 2014, acquisitions similar (or comparable!) to the one
Garth's is currently considering have
had transaction values (offer value of target plus any target debt, net of
cash) that are, on average, 8.0x target's
EBITDA.
• Wayne's shares currently trade at $34 per share
, • Wayne's has 50 million diluted shares outstanding
• Wayne's LTM EBITDA was $250 million
• Wayne's Net Debt was $200 million
What is the offer value per share and the offer premium? ------CORRECT
ANSWER---------------$36.00 per share; 5.9%
The following happened in a recent M&A transaction: 1. PP&E of the target
company was increased from its original book basis of $600 million to $800
million to reflect fair market value for book purposes in accordance with the
purchase method of accounting. 2. no "step-up" for tax purposes. 3. original
tax basis of $650 million. assuming a corporate tax rate of 35% for book
purposes, the company should record the following ------CORRECT
ANSWER---------------A deferred tax liability equal to $52.5 million
An acquisition creates shareholder value: ------CORRECT ANSWER---------
------when a company acquires a business whose fundamental value is
higher than the purchase price
• 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? ------CORRECT ANSWER-----------
----1.7x
QUESTIONS AND CORRECT ANSWERS |
GRADED A+ | VERIFIED ANSWERS | LATEST
VERSION (JUST RELEASED)
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: ------CORRECT ANSWER---------------2.5 per share
undervalued
When looking to do a transaction comp analysis, some of the merger-
related filings that should be looked at include each of the following except:
------CORRECT ANSWER---------------Form s-1
when determining value for a company based on transaction rather than
trading comps, one of the key differences that will affect the value is ------
CORRECT ANSWER---------------premium paid for control of the business
Garth's Micro Brewery, whose shares are currently trading at $40 per
share, is considering acquiring Wayne's
Beer Bottling Co. You have compiled a group of comparable transactions
within the beer bottling space and have
calculated that since 2014, acquisitions similar (or comparable!) to the one
Garth's is currently considering have
had transaction values (offer value of target plus any target debt, net of
cash) that are, on average, 8.0x target's
EBITDA.
• Wayne's shares currently trade at $34 per share
, • Wayne's has 50 million diluted shares outstanding
• Wayne's LTM EBITDA was $250 million
• Wayne's Net Debt was $200 million
What is the offer value per share and the offer premium? ------CORRECT
ANSWER---------------$36.00 per share; 5.9%
The following happened in a recent M&A transaction: 1. PP&E of the target
company was increased from its original book basis of $600 million to $800
million to reflect fair market value for book purposes in accordance with the
purchase method of accounting. 2. no "step-up" for tax purposes. 3. original
tax basis of $650 million. assuming a corporate tax rate of 35% for book
purposes, the company should record the following ------CORRECT
ANSWER---------------A deferred tax liability equal to $52.5 million
An acquisition creates shareholder value: ------CORRECT ANSWER---------
------when a company acquires a business whose fundamental value is
higher than the purchase price
• 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? ------CORRECT ANSWER-----------
----1.7x
