Question
In situations where a firm is not profitable, which of the following statements is correct? Question 1 options: a) PE ratios are an excellent pricing
In situations where a firm is not profitable, which of the following statements is correct?
Question 1 options:
| a) PE ratios are an excellent pricing metric |
| b) It is impossible to reconcile the difference. |
| c) It is not possible to use any earning ratios such as PE or EV/EBITDA. |
| d) None of the above. |
Assume that your analysis of a firm results in a DCF price of $10.00 per share and RV price per share of $8.00.
Question 2 options:
| a) This can never happen because the DCF price must always equal the RV price. |
| b) It is impossible to reconcile the difference. |
| c) The difference is referred to as the "GAP" and must be reconciled to obtain a final price per share. |
| d) None of the above. |
In an M&A situation the Acquirer will:
Question 3 options:
| a) Never offer to buy the Target firm at a price per share higher than the price per share calculated by its DCF analysis. |
| b) Always offer to buy the Target firm at a price per share higher than the price per share calculated by its DCF analysis. |
| c) Always offer to buy the Target firm at a price per share equal to the firm's last trade. |
| d) None of the above. |
In an M&A situation an investor in the Target firm will:
Question 4 options:
| a) Want to sell their share at a price per share calculated by the Acquirer's DCF analysis. |
| b) Want to sell their share at a price per share that will include a significant M&A premium over the current market price of the Target. |
| c) Want to sell their share at a price equal to an industry comparable RV analysis. |
| d) None of the above. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started