MA Modeling Exam Answers From Wall Street

M&A Modeling Exam Answers From Wall Street Prep Latest Update - Actual Exam 100 Questions and 100% Verified Correct Answers Guaranteed A+

• 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? - CORRECT ANSWER:

• 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

a 10-q financial filing has all of the following characteristics except - CORRECT

ANSWER: issued four times a year.

A 338(h)(10) election: - CORRECT ANSWER: 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 - CORRECT ANSWER: 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 1 / 3

• Common dividends of $400 million in 2014

What is the retained earnings balance at the end of 2014? - CORRECT ANSWER: 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? - CORRECT ANSWER: 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? - CORRECT ANSWER: 60.6 million

A debt holder would be primarily concerned with which of the following multiples?

• Enterprise (Transaction) Value / EBITDA

II. Price/Earnings

III. Enterprise (Transaction) Value / Sales - CORRECT ANSWER: 1 and 3 only

A debt holder would be primarily concerned with which of the following multiples?

• Enterprise (Transaction) Value / EBITDA

II. Price/Earnings III. Enterprise (Transaction) Value / Sales - CORRECT ANSWER: one and three only

A good LBO candidate has which of the following characteristics? - CORRECT ANSWER: Little to no existing leverage, steady cash flows and little investment in business through capex and working capital

An acquisition creates shareholder value: - CORRECT ANSWER: 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: -

CORRECT ANSWER: 2.5 per share undervalued

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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: -

CORRECT ANSWER: 7.5 per share undervalued

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 - CORRECT ANSWER: a decrease of 15

million

Depreciation Expense found in the SG&A line of the income statement for a manufacturing firm would most likely be attributable to which of the following -

CORRECT ANSWER: computers used by the accounting department

disadvantages of a DCF do not include - CORRECT ANSWER: free cash flows over the first 5-10 year period represent a significant portion of value and are highly sensitive to valuation assumptions

enterprise (transaction) value represents the: - CORRECT ANSWER: value of all capital invested in a 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%

If a company has projected revenues of $10 billion, a gross profit margin of 65%, and projected SG&A expenses of $2billion, what is the company's operating (EBIT) margin?

- CORRECT ANSWER: 45%

in order to find out how much cash is available to pay down short term debt, such as revolving credit line, you must take - CORRECT ANSWER: beginning cash balance +

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