Exam (elaborations)
M&A MODELING EXAM | WALL STREET PREP
- Course
- Institution
This is the M&A MODELING EXAM | WALL STREET PREP
[Show more]
Content preview
Back to Course | Exit to Learning DashboardREVIEW: M&A MODELING EXAM
Question 1
The intangible assets of a company getting acquired were written up for BOTH book and tax purposes from a pre-deal
book value of $50m to
$60m as part of the acquisition accounting. The companyʼs definite-lived intangible assets are amortized on a
straight-line basis over 15 years for both book and tax purposes. Also assume the acquirer has a tax rate of 40%.
Assume the purchase price exceeds the fair value of net assets. What is the impact of the write-up on the goodwill
recorded in the acquisition?
A decline in goodwill of $10m
An increase in goodwill of
$6m A
decline in goodwill of $6m
An increase in goodwill of $10m
No impact on
goodwill
Question 2
The intangible assets of a company getting acquired were written up for book purposes from a pre-deal book
value of $50m to
$60m but NOT for tax purposes, where the tax basis remained $50m. Assume that targetʼs definite lived
intangible assets are amortized on a
straight-line basis over 15 years for both book and tax purposes. Also assume that the acquirer has a tax rate of 40%.
What is value of created Deferred Tax Liabilities as a result of the book write-up and no tax step up? No new
Deferred Tax
Liabilities
New Deferred Tax Liabilities of $4m
New Deferred Tax Liabilities of
$6m New Deferred Tax Liabilities of
$10m New Deferred Tax Liabilities of
$50m
Question 3
The intangible assets of a company getting acquired were written up for book purposes from a pre-deal book value
of $50m to
$60m but NOT for tax purposes, where the tax basis remained $50m. Assume that targetʼs definite lived intangible
assets are amortized on a
straight-line basis over 15 years for both book and tax purposes. Also assume that the acquirer has a tax rate of 40%.
What is the impact on goodwill as a result of the book write-up and no tax step up?
No
impact on
goodwill
Goodwill
,is lower by
$6 m
Goodwill is
higher by
$6 m
Goodwill is
higher by
$4m
Question 4
It is January 1, 2017. Glocabe Networks is contemplating the acquisition of competitor Jupiter Networks by
issuing stock to purchase target shares (stock purchase). The following details are available:
, January 1, 2017 Glo Ju
cabe piter
Current share price $3 $5
0.00 0.00
Offer price $6
0.00
Diluted shares outstanding (mm) 4.5 2.
2
2017 GAAP earnings per share (EPS) $3. $4
forecast 12 .51
Glocabe and Jupiterʼs diluted shares outstanding have not changed since January 1,
2016. You may assume the companies have the same tax rate.
What is the 2017 accretion/dilution in Glocabeʼs GAAP EPS assuming the acquisition took place on January 1, 2017?
$0.19
$0.96
-$0.43
-$1.54
-$0.24
Question 5
The following data will be used to answer Questions 5-8. It will be repeated in each question.
It is January 1, 2017 and Pegasus is contemplating the acquisition of competitor Chimera. The following details are available
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Treypapers. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $13.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75057 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now