Mergers & Acquisitions
Valuation:
Precedent Transaction Analysis
1
Precedent Transactions Analysis Steps
Step I. Select the Universe of Comparable Acquisitions
Step II. Locate the Necessary Deal-Related and Financial Information
Step III. Spread Key Stati
BUS 336
Mergers & Acquisitions
QUIZ II
Q1. True/False : While valuation implied for a target by comparable and
precedent transaction analyses are based-on relative valuation, value
implied by a DCF is known as intrinsic value.
Q2. If XYZ corp. wants to ra
STONY BROOK UNIVERSITY
BUS 336 M&AS
FALL 2016 QUIZ III Solution
NAME:
LAST NAME:
Company ABC is a privately-held micro-cap firm . It has two peer (comparable) firms which are publicly
listed. The information about the peer firms is as follows:
Firms
Peer
Prof. Torna
Office Hours
MW 18:00-19:00
BUS 336
Solution
Use the table below to answer the next four questions.
Assets
2014
2015
A/R
1,000
389
Inventory
2,198
3,000
Net Fixed Assets
12,400
Income Statement Items as of 2015
Sales
66,850
Costs
39,860
Deprec
Discounted Cash Flow Analysis
Practice Questions
valuation/dcf/overview
1) Project unlevered FCFs (UFCFs).
2) Choose a discount rate.
3) Calculate the TV.
4) Calculate the enterprise value (EV) by discounting the projected UFCFs and TV to net present
valu
Mergers & Acquisitions
Chapter III
1) When there is no debt in the capital structure, what is WAAC equal to?
A.
B.
C.
D.
Cost of debt
Debt-to-total capitalization ratio
Equity-to-total capitalization ratio
Cost of equity
2) What happens to WAAC as the pro
Prof. Torna
Office Hours
W 17:30-18:30
Mergers & Acquisitions
Assignment II
Q1. The Plaza Cafe has an operating cash flow of $78,460, depreciation expense of $8,960, and taxes paid of
$21,590. A partial listing of its balance sheet accounts is as follows:
Prof. Torna
Office Hours
W 17:30-18:30
Mergers & Acquisitions
Assignment III
Q1.
BalanceSheet
IncomeStatement
a) Whats the owners equity for 2013 and 2014?
b) What is the net change in net working capital for 2014?
c) In 2014, the company purchased $8,424
Prof. Torna
Office Hours
W 17:30-18:30
Mergers & Acquisitions
Homework
Q1. Shareholders' equity is equal to:
A. total assets plus total liabilities.
B. net fixed assets minus total liabilities.
C. net fixed assets minus long-term debt plus net working cap
Mergers & Acquisitions
Introduction:
Financial Statements and Cash
Flows (Review)
1
Key Concepts and Skills
Know:
The difference between book value and market
value
The difference between accounting income and
cash flow
The difference between average a
Mergers & Acquisitions
Introduction:
Interpreting Financial Statements
(Review)
1
Key Concepts and Skills
Know:
How to standardize financial statements for
comparison purposes
How to compute and interpret important
financial ratios
The determinants of
Mergers & Acquisitions
Valuation:
Discounted Cash Flow Analysis
(DCF)
1
Discounted Cash Flow Analysis Steps
Step I. Study the Target and Determine Key Performance Drivers
Step II. Project Free Cash Flow
Step III. Calculate Weighted Average Cost of Capital
Mergers & Acquisitions
Valuation:
Comparable Companies Analysis
1
Comparable Companies Analysis Steps
Step I. Select the Universe of Comparable Companies
Step II. Locate the Necessary Financial Information
Step III. Spread Key Statistics, Ratios, and Trad
ExtraQuestionsandSolutions
Q1.
Duringtheyear, XYZCo. hadsalesof$2,600,000. Costofgoodssold, administrative and
selling expenses, and depreciation expense were $1,535,000, $465,000, and $520,000,
respectively.Inaddition,thecompanyhadaninterestexpenseof$245
Prof. Torna
Office Hours
MW 18:00-19:00
Mergers & Acquisitions
In-Class Assignment 1
1. Shareholders' equity is equal to:
A. total assets plus total
liabilities.
B. net fixed assets minus total
liabilities.
C. net fixed assets minus long-term debt plus ne
Page 75-78
1. A
a.
b.
c.
d. benchmarking
e. eval
2. C
3. B
4. B
5. B
6. A
7. C
Current share price
Basic shares
Options
Strick price
$25
200m
20m
$10
New shares 20m
Proceeds from new shares: 20m x $10=200m
Repurchases: 200/25=8m
Fully diluted shares=200m+