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Exam (elaborations)

M & A MODELING EXAM WALL STREET PREP

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M & A MODELING EXAM WALL STREET PREP Download and get certified | Correct Questions and Answers

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  • September 26, 2024
  • 24
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • Wall Street Prep
  • Wall Street Prep
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REVIEW: M&A MODELING EXAM WALL STREET PREP



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 $6m
Goodwill is higher by $6m
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:

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