Texas A&M University
FINANACE 5311 Business Valuation Modeling Part II Qualified Assessment
1 Company A has 279,000 basic shares outstanding and 26,000 outstanding options and warrants. The exercise price of these
options is $3.75. The company also has $200,000 of convertible bonds with an effective conversion price of $4.00. The average
market share price for the reporting period is $7.50.
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Texas A&M University
FINANACE 5311 Business Valuation Modeling Part II Qualified Assessment
1 Company A has 279,000 basic shares outstanding and 26,000 outstanding options and warrants. The exercise price of these
options is $3.75. The company also has $200,000 of convertible bonds with an effective conversion price of $4.00. The average
market share price for the reporting period is $7.50. What is the diluted shares outstanding using the treasury stock method & ifconverted methods?
Additional shares issued if options are converted = 26,000 - (26,000 x $3.75 / $7.50) = 13,000
Shares issued if convertible bonds are converted = $200,000 / $4.00 = 50,000
Diluted shares outstanding = Basic shares outstanding + Dilution from options + Dilution from convertible debt = 279,000 +
13,000 + 50,000 = 342,000
2 A commonly used multiple utilized in comparable company analysis is:
None.
3 Please sort the following into factors most applicable for comparable company analysis and factors most applicable for
precedent transaction analysis: (A) Comparable Company Analysis; (B) Precedent Transaction Analysis
Difficult to adjust for intangibles (i.e. strength of management, growth potential)
4 Lifesaver Inc., a producer of personal protective equipment, trades on the TSX Venture stock exchange at an EV/EBITDA multiple
of 4.0x. From performing a precedent transaction analysis, you note that recent acquisitions of similar companies have
transacted at an EV/EBITDA multiple of 6.0x. The following is not a valid potential reason for this discrepancy:
5 Which of the following is not an important factor to assess when identifying appropriate precedent transactions?
None.
6 Which of the following is not a likely indicator of a highly relevant comparable company?
None.
7 Match the transaction cost items with the appropriate impact on the financial statements.
Directly reduce the equity balance on the balance sheet
Amortized annually on the income statement over the term of the related
None.
8 Calculate the transaction value (in $ thousands) of a theoretical company based on the information provided below.
Current Share Price $18.00
Shares Outstanding (Thousands) 5,000
Total Debt ($ Thousands) $3,700
Cash ($ Thousands) $2,100
Acquisition Premium 10%
9 You’re given the following assumptions for Alibaba Group Holdings Ltd.:
Based on the above information, what is the Enterprise Value of Alibaba Group Holding Limited? Be sure to write down your answer,
as you'll require it to calculate the next question's answer.
10
Given the previously calculated Enterprise Value, what is the NTM EV/EBITDA multiple for Alibaba Group Holdings Limited?
Your Answer 2.7x
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