Mergers & Inquisitions Questions & Correct Answers Pack / Graded A+

1. Why would one company want to buy another company? : One company will want to buy another company if it believes it will be better off after the acquisition takes place. For example: • The Seller's asking price is less than its Implied Value, i.e. the Present Value of its future cash flow...

3 Major Valuation Methodologies : Comparable Companies, Precedent Transactions, and Discounted Cash Flow Analysis Rank of 3 Major Methodologies from Highest to Lowest Expected Value : Nothing is ever definite, however, usually: -Precedent Transactions (because of Control Premium built into acqui...

1. Why would a company want to acquire another company? : A company would acquire another company if it believes it will earn a good return on its investment - either in the form of a literal ROI, or in terms of a higher Earnings Per Share (EPS) number, which appeals to shareholders. There a...

What is the correct formula for Goodwill? A. Market value of acquirer - net identifiable assets of target B. Price paid - fair market value of net identifiable assets of target C. Market value of acquirer - fair market value of target D. Book value of target's equity + Adjustments : B. Price p...

Why would a company want to acquire another company? : A company would acquire another company if it believes it will earn a good return on its investment - either in the form of a literal ROI< or in terms of higher EPS number appealing to its shareholders - Buyer wants to gain market share...

Walk me through a basic merger model : "A merger model is used to analyze the financial profiles of 2 companies, the purchase price and how the purchase is made, and determines whether the buyer's EPS increases or decreases. Step 1 is making assumptions about the acquisition - the price and wh...