WALL STREET PREP PREMIUM EXAM TRANSACTION COMPS MODELING WALL STREET PREP EXAM QUESTIONS AND CORRECT ANSWERS GRADED A+

WALL STREET PREP PREMIUM EXAM

TRANSACTION COMPS MODELING WALL STREET PREP EXAM

QUESTIONS AND CORRECT ANSWERS

GRADED A+



Q1.

In transaction comps analysis, what is the primary purpose of including a control
premium?

A. To reflect synergies realized by the buyer
B. To adjust for market volatility
C. To account for higher ownership concentration
D. To compensate for minority interest

Answer: A. To reflect synergies realized by the buyer
Rationale: Transaction comps often include a premium above trading comps,
reflecting the price acquirers are willing to pay for control and synergies.



Q2.

Which of the following multiples is most commonly used in transaction comps?

A. P/E Ratio
B. EV/EBITDA
C. Price-to-Book
https://www.stuvia.com/user/MBOFFIN

,D. Dividend Yield




https://www.stuvia.com/user/MBOFFIN

,Answer: B. EV/EBITDA
Rationale: EV/EBITDA is the most widely used because it’s capital structure-
neutral and compares operating performance across companies.



Q3.

When building a transaction comps model, what is the first step?

A. Gather deal multiples from precedent databases
B. Select a universe of comparable transactions
C. Normalize EBITDA
D. Calculate synergies

Answer: B. Select a universe of comparable transactions
Rationale: The first step is to screen for and identify relevant precedent
transactions.



Q4.

Why is EV/Revenue sometimes used instead of EV/EBITDA in precedent
transactions?

A. EBITDA may not be available or reliable
B. It better captures working capital efficiency
C. It accounts for tax rate differences
D. It eliminates goodwill adjustments




https://www.stuvia.com/user/MBOFFIN

, Answer: A. EBITDA may not be available or reliable
v v v v v v v v



Rationale: For early-stage or low-profit companies, revenue multiples are
v v v v v v v v



often the only usable measure.
v v v v v




Q5.

Which of the following best explains the difference between trading comps and
v v v v v v v v v v v



transaction comps? v




A. Trading comps include synergies, transaction comps do not
v v v v v v v



B. Transaction comps reflect control premiums, trading comps do not
v v v v v v v v



C. Trading comps are based on private companies, transaction comps are not
v v v v v v v v v v



D. Both measure the exact same multiples
v v v v v




Answer: B. Transaction comps reflect control premiums, trading comps
v v v v v v v v



v do not
v




Q6.

If a precedent transaction had EV = $800M and LTM EBITDA = $100M,
v v v v v v v v v v v v



v what was the EV/EBITDA multiple?
v v v v




A. 6x
B. 8x
C. 10x
D. 12x

Answer: B. 8x v v



Rationale: $800M ÷ $100M = 8x. v v v v v




https://www.stuvia.com/user/MBOFFIN