Financial Modelling And Valuation Test Part 3

Quiz Questions

• 1.
  Q.1 What are the circumstances in which a strategic buyer might use an LBO analysis?

  • A.
    A. To understand the debt capacity of their company
  • B.
    B. To understand the price a financial sponsor bidder can afford to pay when competing for an asset in an auction process
  • C.
    C. To help spread comparable companies’ analysis
• 2.
  Q2. In an LBO analysis, what are the most important variables to look at for sensitivity analysis? I. Purchase price II. Financing structure III. Historical dividends IV. Exit multiple

  • A.
    A. I and II
  • B.
    B. II and III
  • C.
    C. I, II, and IV
• 3.
  Q3. What is the typical variation in IRR based on the year of exit?

  • A.
    A. Maintains its value throughout the investment horizon
  • B.
    B. Decreases as a result of slowing growth rates as well as the time value of money
  • C.
    C. Continues to grow indefinitely
• 4.
  Q4. In an LBO model, how does the senior notes balance change over the course of a projected period of time?

  • A.
    A. Decreases
  • B.
    B. Increases
  • C.
    C. Stays constant
• 5.
  Q5. What is the most important legal document that establishes a formal agreement between a buyer and a seller to purchase the object of their affection?

  • A.
    A. Confidentiality agreement
  • B.
    B. Indenture
  • C.
    C. Definitive purchase/sale agreement
• 6.
  Q6. It is considered a bad transaction if the pro forma EPS of two combined companies is lower than the standalone EPS of the company that is being acquired.

  • A.
    A. Accretive
  • B.
    B. Dilutive
  • C.
    C. Consensus
• 7.
  Q7. Deferred tax liabilities are calculated as

  • A.
    A. Goodwill less PP&E
  • B.
    B. PP&E multiplied by the acquirer tax rate
  • C.
    C. Tangible and intangible asset write-ups multiplied by the tax rate applicable to the acquirer
• 8.
  Q8. What is the typical projection period of an LBO model for a potential debt provider in terms of years?

  • A.
    A. 1-2 years
  • B.
    B. 3-4 years
  • C.
    C. 7-10 years
• 9.
  Q9.What is a Greenfield?

  • A.
    A. Building a new factory from scratch
  • B.
    B. Modifying /upgrading a preexisting factory
  • C.
    C. Integrating a newly purchased company quickly and efficiently
• 10.
  Q10. When the pro forma earnings per share of two combined companies exceeds the earnings per share of the acquirer on a standalone basis, the transaction is said to be profitable.

  • A.
    A. Accretive
  • B.
    B. Dilutive
  • C.
    C. Consensus
• 11.
  Q11. Which of the following are common types of synergies realized in M&A transactions? I. Merger II. Revenue III. Cost IV. Stock

  • A.
    A. I and II
  • B.
    B. II and III
  • C.
    C. III and IV
• 12.
  Q12. What is mean by conglomeration?

  • A.
    A. Corporation that is the largest amongst its competitors
  • B.
    B. Corporation that sells its products and services in several countries
  • C.
    C. Acquisition strategy whereby a company makes acquisitions in relatively unrelated business areas
• 13.
  Q13. Which of the following factors contributes to the reduction of goodwill created during a merger and acquisition transaction?

  • A.
    A. Write-up of tangible assets
  • B.
    B. Equity control premium
  • C.
    C. Future synergies
• 14.
  Q14. The difference between the price paid for a target and its identifiable net asset value is referred to as

  • A.
    A. Tangible Value
  • B.
    B. Goodwill
  • C.
    C. Intangible value
• 15.
  Q15. Which of the following are the two main marketing documents for an auction's first round?

  • A.
    A. Teaser & confidentiality agreement
  • B.
    B. Teaser & confidential information memorandum
  • C.
    C. Teaser & bid procedures letter

Quiz Outcomes

• 1.
  Result 1

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