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How does depreciation appear on a company’s income statement (IS) and cash flow statement (CF)?
In addition to the top of the balance sheet, where else in the financial statements can a company’s cash balance be found?
Goodwill created in an acquisition can be amortized by the acquiror.
When selecting a universe of comparable companies, which comparison to the target company is not considered?
Which of the following is a typical source for forward-looking projections of a company’s performance?
What is the correct way to calculate a company’s equity value?
A company’s enterprise value remains the same when it issues debt and holds the proceeds as cash on the balance sheet.
To calculate valuation based on a comparable companies analysis, a banker would not use which of the following?
In a transaction comps analysis, the most recent deals tend to be the most relevant.
Under a fixed exchange ratio acquisition, what happens to as the acquiror’s stock price rises?
Which of the following is not a piece of information that is likely to be spread when conducting a trading comps analysis.
Why can it be difficult to use data about private companies in a trading comps analysis?
If a company’s stock trades at $15 and its options have a $15 strike price, what will be the effect of options exercise on the fully diluted shares outstanding?
Which of the following is not a key step in the process for conducting a discounted cash flow (DCF) analysis?
What is the DCF free cash flow for the year for the following company? EBIT of $20 million, taxes of $3 million, depreciation & amortization of $2 million, capex of $5 million and a $1 million increase in net working capital?
Changes in which balance sheet accounts must be examined to calculate a DCF’s change in net working capital?
If a company’s “days inventory held” is 60, approximatelty what are the “inventory turns”?
While comparable companies and trading comps analyses provide a “market value”, DCF provides an “intrinsic value.”
If a company’s optimal capital structure is debt free, it’s WACC is equal to:
What is the terminal value for a DCF analysis with $35 million of free cash flow in the final year, a 3% perpetual growth rate and a 12% WACC?
What is the present value of a cash inflow of $200 million in 4 years assuming an 8% discount rate?
Investment bankers often prepare LBO models to assess the price sponsors can potentially pay for an acquisition.
The name given to a financial model’s feature that allows users to easy switch between cases or scenarios is:
Which of the following is not a typical section of a financial model’s cash flow statement?
A financial model’s “cash flow sweep” performs what function?
When analyzing an LBO model’s output, which data point is least important for a banker to examine?
All else equal, a lower purchase price leads to a higher IRR.
The best way to force a financial model with circular references to compute a value for interest expense is to:
The quickest way to see if a change to a model’s inputs has caused an error is to:
In an LBO transaction, an investment bank may serve as both buy-side advisor and as a debt underwriter.
Which of the following is not a key characteristic of a strong LBO candidate?
What is the IRR for the following cash flows: $150 million invested at the beginning and $500 million realized at the end of year 6?
Leverage is used to enhance returns in an LBO by:
Which of the following is not a typical manner in which a sponsor’s LBO investment is realized?
In an M&A deal, data room visits take place during the first round of the auction.
What are the minimum synergies required to avoid dilution: pre-deal EPS of $0.75, pre-deal share count of 50 million, post-deal share count of 60 million, $0 interest expenses, 40% taxes, target EBIT of $9 million.
One key advantage of a targeted auction as compared to a broad auction is:
Which of the following shows the proper ranking of various financing sources in a company’s capital structure (in order of declining seniority)?
Which of the following is not a typical characteristic of high yield bonds?
What is the name given to a series of meetings explaining the merits of an investment with potential investors in a bond or stock offering?