What is a major limitation of the DCF model?

What is a major limitation of the DCF model?

• A) Too simplistic

• B) Ignores market conditions

• C) Relies heavily on forecasts

• D) Only suitable for tech companies

Why are EBITDA multiples often preferred over DCF in M&A transactions?

• They offer higher valuation

• They reflect market sentiment and are simpler

• They only apply to loss-making companies

• They are not influenced by market conditions

What is one limitation of using LBO models for valuing a company?

• Too simplistic

• Applicable only to financial buyers

• Always overestimates the company's value

• Ignores the company’s debt capacity

How is accretion/dilution analysis used in M&A transactions?

• To determine the time value of money

• To calculate the present value of future cash flows

• To assess the impact on the acquirer’s EPS

• To find comparable transactions

Why might the simplicity of EBITDA multiples make them appealing in deal negotiations?

• They require detailed financial projections

• They make it easier to achieve consensus

• They are based on past performance only

• They consider the time value of money

Which valuation method is best suited for a private equity firm evaluating a takeover target?

• DCF

• Comparable Transactions

• LBO

• Accretion/Dilution Analysis

What does it mean if a merger is considered "accretive"?

• The combined company's debt increases

• The acquirer's EPS decreases

• The combined company's EPS increases

• The deal uses a lot of leverage