Contents
Cover
Series
Title Page
Copyright
About the Authors
CONTACT THE AUTHORS

Acknowledgements
Introduction
TARGET AUDIENCE
CONTENT AND APPLICATIONS

Chapter 1: Comparable Companies Analysis
CHAPTER 1 ANSWERS AND RATIONALE

Chapter 2: Precedent Transactions Analysis
CHAPTER 2 ANSWERS AND RATIONALE

Chapter 3 :Discounted Cash Flow Analysis


CHAPTER 3 ANSWERS AND RATIONALE

Chapter 4: Leveraged Buyouts
CHAPTER 4 ANSWERS AND RATIONALE

Chapter 5: LBO Analysis
CHAPTER 5 ANSWERS AND RATIONALE

Chapter 6: Sell-Side M&A
CHAPTER 6 ANSWERS AND RATIONALE

Chapter 7: Buy-Side M&A
CHAPTER 7 ANSWERS AND RATIONALE


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About the Authors

JOSHUA ROSENBAUMis a Managing Director at UBS Investment
Bank in the Global Industrial Group. He originates, structures, and
advises on M&A, corporate finance, and capital markets
transactions. Previously, he worked at the International Finance
Corporation, the direct investment division of the World Bank. He
received his AB from Harvard and his MBA with Baker Scholar
honors from Harvard Business School.

JOSHUA PEARLis an investment analyst at Brahman Capital Corp.



Previously, he structured and executed leveraged loan and high yield
bond financings, as well as leveraged buyouts and restructurings as a
Director at UBS Investment Bank in Leveraged Finance. Prior to
UBS, he worked at Moelis & Company and Deutsche Bank. He
received his BS in Business from Indiana University's Kelley School
of Business.

CONTACT THE AUTHORS
Please feel free to contact JOSHUA ROSENBAUMand JOSHUA
PEARL with any questions, comments, or suggestions for future
editions at


Acknowledgments
We would like to highlight the contributions made by Joseph
Gasparro toward the successful production of this workbook. His
contributions were multi-dimensional and his unwavering
enthusiasm, insights, and support were nothing short of exemplary. In
general, Joe's work ethic, creativity, “can-do” attitude, and
commitment to perfection are a true inspiration. We look forward to
great things from him in the future.
We would also like to thank Ezra Faham for all his efforts and
contributions in the completion of this workbook.


Introduction
This workbook is designed for use both as a companion to our book,
Investment Banking: Valuation, Leveraged Buyouts, and Mergers
& Acquisitions, Second Edition, as well as on a standalone basis.

Investment Banking focuses on the primary valuation methodologies
currently used on Wall Street—namely, comparable companies
analysis, precedent transactions analysis, discounted cash flow
(DCF) analysis, and leveraged buyout (LBO) analysis, as well as
detailed mergers & acquisitions (M&A) analysis from both a sellside and buy-side perspective. Our workbook seeks to help solidify
knowledge of these core financial topics as true mastery must be
tested, honed, and retested over time. We envision the workbook
being used as a self-help tool for students, job seekers, and existing
finance professionals, as well as in formal classroom and training
settings.
The workbook provides a mix of multi-step problem set exercises,
as well as multiple choice and essay questions. We also provide a
comprehensive answer key that aims to truly teach and explain as
opposed to simply identify the correct answer. Therefore, the
answers themselves are an effective learning tool. The level of
difficulty for these exercises and questions ranges from basic to
advanced. The format of the workbook is designed to optimize
mastering the critical financial tools discussed in Investment
Banking and therefore corresponds to its chapters, as shown below:
Chapter 1: Comparable Companies Analysis
Chapter 2: Precedent Transactions Analysis
Chapter 3: Discounted Cash Flow Analysis
Chapter 4: Leveraged Buyouts
Chapter 5: LBO Analysis


Chapter 6: Sell-Side M&A
Chapter 7: Buy-Side M&A

TARGET AUDIENCE

We are confident that this workbook will enable users to take their
learning to the next level in terms of understanding and applying the
critical financial tools necessary to be an effective finance
professional. Consequently, our target audience for the workbook
overlaps with Investment Banking—namely current and aspiring
investment bankers, students, career changers, private equity and
hedge fund professionals, sell-side research analysts, and finance
professionals at corporations (including members of business
development, finance, and treasury departments). We also believe
our workbook is highly beneficial to those attorneys, consultants, and
accountants focused on M&A, corporate finance, capital raising, and
other transaction advisory services.
At the same time, our workbook is designed to serve as the ultimate
teaching tool for finance professors, instructors, and trainers. The
multiple choice questions are complemented by rigorous multi-step
exercises designed to ensure mastery of key modeling conventions
and financial calculations. It is the perfect complement to classroom
or online instruction, as well as core course reading materials. In
fact, Investment Banking and this workbook are designed in an
integrated manner so as to provide a foundation around which a
professor, instructor, or trainer can build an entire course.

CONTENT AND APPLICATIONS
The multi-step exercises are instrumental for learning the
calculations and modeling skills behind the core valuation, LBO, and


M&A tools. Once mastered, these exercises provide a solid
foundation for financial modeling (including crafting financial
projections), and performing comparable companies, precedent

transactions, DCF and LBO Analysis, as well as comprehensive
merger consequences analysis (including the creation of pro forma
financial statements). They also provide a sound understanding of
more
complex
calculations
and
nuances
involving
accretion/(dilution) analysis, exchange ratios, premiums paid,
treasury stock method (TSM), capital asset pricing model (CAPM),
weighted average cost of capital (WACC), goodwill, tangible and
intangible write-ups, deferred tax liabilities, and numerous other
critical topics.
The multiple choice questions are designed to be used on both an
individual as well as collective basis. In other words, individual
questions from each chapter can be mixed and matched to
accommodate any testing, learning, or training format. At the same,
taken collectively for a given financial topic, the questions and
exercises provide an integrated and multidimensional approach that
can be used to teach and learn the material, whether individually, in
the classroom, or for a training program.


CHAPTER 1
Comparable Companies Analysis
1) Using the information provided for Gasparro Corp., complete the
questions regarding fully diluted shares outstanding

a. Calculate Gasparro Corp.'s in-the-money options/warrants


____________________________________________________
b. Calculate proceeds from in-the-money options/warrants


____________________________________________________
c. Calculate net new shares from the options/warrants

____________________________________________________
d. Calculate fully diluted shares outstanding

____________________________________________________
2) Using the prior answers and information, as well as the balance
sheet data below, calculate Gasparro's equity value and enterprise
value


a.Calculate equity value

____________________________________________________
b. Calculate enterprise value

____________________________________________________
3) Using the information provided for Gasparro, complete the
questions regarding non-recurring items


a. Calculate adjusted LTM gross profit for Gasparro, assuming
the $30.0 million inventory charge is added back to COGS


____________________________________________________
b. Calculate adjusted LTM EBIT

____________________________________________________
c. Calculate adjusted LTM EBITDA

____________________________________________________
d. Calculate adjusted LTM net income


____________________________________________________
4) Using the prior answers and information, complete the questions
regarding Gasparro's LTM return on investment ratios
a. Calculate return on average invested capital

____________________________________________________
b. Calculate return on average equity

____________________________________________________
c. Calculate return on average assets

____________________________________________________
d. Calculate implied annual dividend per share

____________________________________________________
5) Using the prior answers and information, complete the questions
regarding Gasparro's LTM credit statistics
a. Calculate debt-to-total capitalization

____________________________________________________

b. Calculate total debt-to-EBITDA

____________________________________________________
c. Calculate net debt-to-EBITDA

____________________________________________________
d. Calculate EBITDA-to-interest expense


____________________________________________________
e. Calculate (EBITDA – capex)-to-interest expense

____________________________________________________
f. Calculate EBIT-to-interest expense

____________________________________________________
6) Using the prior answers and information, calculate Gasparro's
trading multiples

a. Calculate Gasparro Corp.'s LTM enterprise value-to-sales

____________________________________________________
b. Calculate 2012E enterprise value-to-EBITDA

____________________________________________________
c. Calculate 2013E enterprise value-to-EBIT


____________________________________________________
d. Calculate 2014E P/E


____________________________________________________
e. Calculate 2014E FCF yield

____________________________________________________
7) Using the prior answers and information, calculate Gasparro's
growth rates

a. Calculate Gasparro's historical one-year sales growth

____________________________________________________
b. Calculate historical two-year EBITDA compounded annual
growth rate

____________________________________________________
c. Calculate estimated one-year FCF growth

____________________________________________________
d. Calculate estimated two-year EPS CAGR

____________________________________________________


8) Using the information provided for ValueCo's peers, complete
the questions regarding LTM profitability margins

a. Calculate BuyerCo's gross profit margin

____________________________________________________
b. Calculate Sherman Co.'s EBITDA margin


____________________________________________________
c. Calculate Pearl Corp.'s EBIT margin

____________________________________________________
d. Calculate Kumra Inc.'s net income margin

____________________________________________________
e. Calculate the mean EBITDA margin

____________________________________________________
f. Calculate the median EBIT margin

____________________________________________________
9) Using the information below, calculate the LTM leverage and


coverage ratios for ValueCo's peers

a. Calculate BuyerCo's debt-to-total capitalization (using market
value of equity)

____________________________________________________
b. Calculate Sherman Co.'s debt-to-EBITDA ratio

____________________________________________________
c. Calculate Pearl Corp.'s net debt-to-EBITDA ratio

____________________________________________________
d. Calculate Kumra Inc.'s EBITDA-to-interest expense ratio


____________________________________________________
e. Calculate Kumra Inc.'s (EBITDA – capex)-to-interest
expense ratio


____________________________________________________
f. Calculate Kumra Inc.'s EBIT-to-interest expense ratio

____________________________________________________
g. Calculate the mean debt-to-EBITDA leverage ratio

____________________________________________________
h. Calculate the median EBITDA-to-interest expense ratio

____________________________________________________
10) Using the information below, calculate the LTM valuation
multiples for ValueCo's peers

a. Calculate BuyerCo's enterprise value-to-sales multiple

____________________________________________________

b. Calculate Sherman Co.'s enterprise value-to-EBITDA


multiple

____________________________________________________
c. Calculate Pearl Corp.'s enterprise value-to-EBIT multiple


____________________________________________________
d. Calculate Kumra Inc.'s P/E multiple

____________________________________________________
e. Calculate the mean enterprise value-to-EBITDA multiple

____________________________________________________
f. Calculate the median P/E ratio

____________________________________________________
11) Using the information below, calculate ValueCo's implied
valuation ranges using the company's LTM EBITDA

a. Calculate ValueCo's implied enterprise value range

____________________________________________________
b. Calculate ValueCo's implied equity value range

____________________________________________________
c. Calculate ValueCo's implied share price range


____________________________________________________
12) Using the information below, calculate ValueCo's implied
valuation ranges using the company's LTM net income

a. Calculate ValueCo's implied equity value range

____________________________________________________

b. Calculate ValueCo's implied share price range

____________________________________________________
13) Which of the following is the correct order of steps to complete
comparable companies analysis?
I. Locate the Necessary Financial Information
II. Select the Universe of Comparable Companies
III. Spread Key Statistics, Ratios, and Trading Multiples
IV. Determine Valuation
V. Benchmark the Comparable Companies
A. II, I, III, V, IV
B. I, II, III, IV, V
C. II, I, III, IV, V
D. III, I, IV, V, IV
14) All of the following are business characteristics that can be
used to select comparable companies EXCEPT
A. Products and Services
B. Distribution Channels