Managment Engineer - Investment banking

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Contenido 1. Comparable companies analysis ................................ ................................ ....................... 2 2. Precedent transactions analysis ................................ ................................ ....................... 6 3. Discounted Cash Flows Model (DCF) ................................ ................................ ................. 9 4. Leveraged Buy -Outs (LBOs) ................................ ................................ ............................ 12 5. Solutions ................................ ................................ ................................ ..................... 15 1. Comparable companies analysis ................................ ................................ .................. 15 2. Precedent transactions analysis ................................ ................................ ................... 16 3. Discounted Cash Flows Model (DCF) ................................ ................................ ............. 17 4. Leveraged Buy -Outs (LBOs) ................................ ................................ ......................... 19 1. Comparable companies analysis - link 1. W h ich of the following is the cor rect order of steps t o complete comparable companies a n a lysis? I. Locate the necessary financial information II. Select the universe of comparable companies III. Spread key statistics, ratios, and trading multiples IV. Determine valuation V. Benchmark the comparable companies a) II, I, III, V, IV b) I, II, III, IV, V c) II, I, III, IV, V d) III, I, II, V, IV 2. W h ich of the following are key busine ss chara cteristics to examine when screening for co m parable companies? I. Sector II. Return on investment III. End markets IV. Distribution channels V. Return on assets a) I and II b) II and IV c) I, III, and IV d) I, II, II, IV, and V 3. W h ich of t he following ar e key financial characteristics to examine when screening for co m parable companies? I. Customers II. Profitability III. Growth profile IV. Credit profile V. End markets a) II and III b) II, III and IV c) I, II and IV d) II, III and V 4. W h ich of the following is not a source for locating financial information for comparable co m panies? a) 10 -K b) 13 -D c) Investor presentations d) Equity research 5. W h ich of t he following is t he co rrect ca lculation for f ully d iluted share outstanding w h en used in t rading comps? a) Out -of-the -money options and warrants + in -the -money convertible securities b) Basic shares outstanding + in -the -money options and warrants + in -the -money convertible securities c) In-the -money options and warrants + in -the -money convertible securities d) Basic shares ou tstanding + out -of-the -money options and warrants 6. W h ich m ethodology is u s ed t o d etermine a d ditional s h ares f rom “in -the -money” o p t ions a nd war rants when determining fully d iluted shar es? a) Treasury Stock Method (TSM) b) If-converted Method c) Net share settlement Method (NSS) d) In-the -money Method 7. C a lculate Fully Diluted shares using t he information below Assumptions Current share price 25 $ Basic shares outstanding 200 millions Exercisable options 20 millions Weighted average exercise price 10 M$ a) 150.4 million b) 200.5 million c) 212.0 million d) 220.0 million 8. W h a t is the most conservative (most dilutive) way to treat options and warrants when ca lculating fully d iluted shares outstanding? a) Use all outstanding in -the -money options and warrants b) Use all exercisable i n-the -money options and warrants c) Ignore all in -the -money options and warrants d) Ignore all outstanding in -the -money options and warrants 9. W h a t is the formula for calculating enterprise va lue? a) Equity value + Total debt b) Equity value + Total debt + Preferred stock + Non -controlling interest – Cash c) Equity value + Total debt - Preferred stock - Non -controlling interest - Cash d) Equity value + Total debt + Preferred stock + Non -controlling interest + Cash 10. All else b eing constan t, how does enterprise value change if a company r aises equity a n d use s the entir e amount to repay debt? a) Stays constant b) Increases c) Decreases d) Not enough information to answer 11. W h ich of the following is not an a ppropriate valuation multiple? a) EV/EBITDA b) EV/EBIT c) EV/Net income (Net income = Net profit = NP) d) EV/Sales 12. Th e P /E r atio is equivalent t o (with E referring to earnings per share, EPS): a) E/NP (E=equity) b) EV/NP c) EV/EBITDA d) Share price/free cash flow (= P/FCF) 13. W h en calculating an interest coverage ratio, which of the following is not used in the n u merator? a) Net income b) EBIT c) EBITDA d) EBITDA -Capex 14. S h ow the n ecessary a djustments a nd pro for ma amounts if a company issues 200 M$ o f equity and uses the p roceeds to repay debt. Issuance of equity to repay debt [$ in millions] Actual Adjustments Pro forma 2012 + - 2012 Equity value 1,200 Plus: total debt 750 Plus: preferred stock 100 Plus: minority interest 50 Less: cash and cash eq. (100) Enterprise value 2,000 15. C a lculate a djusted net income, EBITDA, and EPS, r espectively, a ssuming 50 M$ of D & A, a nd a djusting for the 10 M$ restructur ing char ges as well as an inventory write -down of 5 M $. Income statement [M$, except per share data] Reported 2012 Sales 1,000 M$ Cost of goods sold (COGS) 625 Gross profit 375 M$ Selling, general and administrative (SG&A) 230 Restructuring charges 10 Operating income (EBIT) 135 M$ Interest expense 35 Pre -tax income (EBT) 100 M$ Income taxes @40% 40 Net income 60 M$ Weighted average diluted shares 30 Diluted earnings per share 2 $ a) 60 M$, 185 M$, 2 $ b) 69 M$, 200 M$, 2.3 $ c) 60 M$, 200 M$, 2 $ d) 69 M$, 185 M$, 2.3 $ 2. Precedent transactions analysis - link 1. W h ich of the following is not a traditional sour ce when creating an initial list of co m parable acquisitions? a) M&A databases b) Target M&A history c) Cre dit reports d) Fairness opinions for recent transactions in the target’s sector 2. W h ich question(s) would a banker typically ask t o better understand the context of an M & A deal? I. Was the acquirer a strategic buyer or a financial sponsor? II. Was the nature of the de al friendly or hostile? III. Was the tar get sold through an auction process or a negotiate sale? IV. What were the buyer’s and seller’s motivations for the transaction? a) I and IV b) II and III c) III and IV d) I, II, III and IV 3. I n a ddition to a h igh purchase p rice, what other factors ar e important to the seller in a s s essing the va lue of a proposal? I. Speed of execution II. Date of management presentation III. Certainty of completion IV. Regulatory approvals needed a) II and III b) II and IV c) I, II and IV d) I, III and IV 4. W h ich of the following i s not conta ined in a merger p roxy? a) Terms of transaction b) Description of the financial analysis underlying the fairness opinion c) Definitive purchase/sale agreement d) Target’s customer list 5. A t a r get h as _____ days to r espond to a tender offer and file a _____ a) 10; 10 -Q b) 10; Schedule 14D -9 c) 15; 10 -Q d) 15; Schedule TO 6. W h ich exchange r atio is most common in a stock for stock tr ansaction? a) Linear b) Floating c) Fixed d) Non -floating 7. W h a t is the exchange ratio if an acquirer a grees to exchange 0.5 shares of its stock for ev ery 2 shar es of t he tar get’s s tock? a) 0.25 b) 0.45 c) 2.0 d) 4.0 8. W h en is a floating exchange r atio offer most commonly used? a) Acquirer is significantly larger than target b) Target is significantly larger than acquirer c) Target is public d) Acquirer is public 9. C a lculate the implied pr emium paid assuming the target has an unaffected share p r ice of 50 $ a nd the offer price is 67.5 $ per share. a) 20% b) 25% c) 30% d) 35% 10. W h y is “ time lag” a potential weakness when using p recedent transaction? a) If the target company in an M&A transaction had a fiscal year ending April 30, it is difficult to include them in the group b) Precedent transactions, by definition, took place in the past and it is possible that they do not reflect prevailing market conditions c) It takes a long time to sprea d precedent transactions d) Certain precedent transactions were completed in a shorter time period than other deals 11. W h a t ar e the primary types of synergies? I. Revenue II. Transaction III. Cost IV. Time a) I and II b) I and III c) III and IV d) I, II and III 12. As s uming a s tock -for -stoc k transaction, determine t he exchange ratio a) 0.5 b) 0.75 c) 1.1 d) 2.0 13. W h a t is the premium paid for the target? a) 15% b) 17% c) 20% d) 25% 14. C a lculate the targ et’s offer value and enterprise value a) 3.8 M$ and 4.8 M$ b) 4.25 M$ and 5.25 M$ c) 4.75 M$ and 5.15 M$ d) 5.25 M$ and 6.25 M$ 15. C a lculate the targ et’s LTM enterprise value -to -EBITDA a) 9.0x b) 8.4x c) 6.4x d) 7.4x