Back to Course | Exit to Learning Dashboard
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:
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:
