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    Investment Banking 
Discussion questions_Lecture 3  Lecture 3:  
1. Question on the sources of information to study the target company in Step 1 of the 
Comparable company analysis: Discuss the sources of information for the target 
company if it is: a. a public company.  b. a private company. 
2. Question on LTM (last twelve months) 昀椀 nancial data: 
If the current month is October 2010, explain LTM and how to calculate LTM 昀椀 nancial data in this case. 
3. Question on growth rates and CAGR (Compound annual growthrate):  Suppose EPS 2012 = $1.4   EPS 2013 = $1.7   EPS 2014 = $2.1 
a. Calculate the growth rate of EPS from 2012 to 2013.  1.7  = x100%=21.43%  1.4 
b. Calculate CAGR (2012-2014).  =¿ 
4. Question on the adjustments for non-recurring items: 
A company has a one-time pre-tax gain of $25 due to the sale of a noncore business.  Tax rate = 38%.  If the reported EBIT = $675  Then adjusted EBIT = ?   reported EBITDA = $850   adjusted EBITDA = ?   reported NI = $355.3   adjusted NI = ?  One time pre-tax gain: 
After tax impact = 25 x (1-0.38) = 15.5$ 
Adjusted EBIT = 675 - 25 = 650$ 
Adjusted EBIT DA = 850 - 25 = 825$ Adjusted net income  = 355.3 - 15.5 = 339.8$ 
5. Question on implied valuation range: 
a. Suppose the most appropriate trading multiple range obtained from 
best comparable companies is as follows:  EV/EBITDA = 7 – 8x 
If EBITDA (LTM) of the target company is $700, what’s the implied 
Enterprise value (EV) range for the target company. 
b. Using the implied EV calculated in part a, calculate the range of implied 
equity value and implied share price, given the following values:  Total debt = $1,850 
Cash and cash equivalents = $100 
Company does not have preferred stock and non-controlling interest. 
Fully diluted shares outstanding = 200 shares