Wall Street Prep Premium Exam
Questions and Answers12
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 $2.50 per share.
Company A has 300 million diluted shares outstanding. Company A's major competitors are
trading at an average share price / 2014 Expected EPS of 23.0x.
Using the comparable company analysis valuation method, Company A shares are: - ANSWERS-
7.5 per share undervalued
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 - ANSWERS-one and three only
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: - ANSWERS-
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: - ANSWERS-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 - ANSWERS-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? - ANSWERS-$36.00 per share; 5.9%
What is generally not considered to be a pre-tax non-recurring (unusual or infrequent) item? -
ANSWERS-Extraordinary gains/losses
what is false about depreciation and amortization - ANSWERS-D&A may be classified within
interest expense
Company X's current assets increased by $40 million from 2007-2008 while the companies
current liabilities increased by $25 million over the same period. the cash impact of the change
in working capital was - ANSWERS-a decrease of 15 million
the final component of an earnings projection model is calculating interest expense. the
calculation may create a circular reference because - ANSWERS-interest expense affects net
income, which affects FCF, which affects the amount of debt a company pays down, which, in
turn affects the interest expense, hence the circular reference
Questions and Answers12
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 $2.50 per share.
Company A has 300 million diluted shares outstanding. Company A's major competitors are
trading at an average share price / 2014 Expected EPS of 23.0x.
Using the comparable company analysis valuation method, Company A shares are: - ANSWERS-
7.5 per share undervalued
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 - ANSWERS-one and three only
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: - ANSWERS-
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: - ANSWERS-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 - ANSWERS-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? - ANSWERS-$36.00 per share; 5.9%
What is generally not considered to be a pre-tax non-recurring (unusual or infrequent) item? -
ANSWERS-Extraordinary gains/losses
what is false about depreciation and amortization - ANSWERS-D&A may be classified within
interest expense
Company X's current assets increased by $40 million from 2007-2008 while the companies
current liabilities increased by $25 million over the same period. the cash impact of the change
in working capital was - ANSWERS-a decrease of 15 million
the final component of an earnings projection model is calculating interest expense. the
calculation may create a circular reference because - ANSWERS-interest expense affects net
income, which affects FCF, which affects the amount of debt a company pays down, which, in
turn affects the interest expense, hence the circular reference
