WALL STREET PREP PREMIUM EXAM
TRANSACTION COMPS MODELING WALL STREET
PREP EXAM | QUESTIONS AND CORRECT ANSWERS
GRADED A+ | LATEST UPDATE
Q1.
In transaction comps analysis, what is the primary purpose of including a control
premium?
A. To reflect synergies realized by the buyer
B. To adjust for market volatility
C. To account for higher ownership concentration
D. To compensate for minority interest
Answer: A. To reflect synergies realized by the buyer
Rationale: Transaction comps often include a premium above trading comps,
reflecting the price acquirers are willing to pay for control and synergies.
Q2.
Which of the following multiples is most commonly used in transaction comps?
A. P/E Ratio
B. EV/EBITDA
C. Price-to-Book
D. Dividend Yield
,Answer: B. EV/EBITDA
Rationale: EV/EBITDA is the most widely used because it’s capital structure-
neutral and compares operating performance across companies.
Q3.
When building a transaction comps model, what is the first step?
A. Gather deal multiples from precedent databases
B. Select a universe of comparable transactions
C. Normalize EBITDA
D. Calculate synergies
Answer: B. Select a universe of comparable transactions
Rationale: The first step is to screen for and identify relevant precedent
transactions.
Q4.
Why is EV/Revenue sometimes used instead of EV/EBITDA in precedent
transactions?
A. EBITDA may not be available or reliable
B. It better captures working capital efficiency
C. It accounts for tax rate differences
D. It eliminates goodwill adjustments
,Answer: A. EBITDA may not be available or reliable
Rationale: For early-stage or low-profit companies, revenue multiples are often
the only usable measure.
Q5.
Which of the following best explains the difference between trading comps and
transaction comps?
A. Trading comps include synergies, transaction comps do not
B. Transaction comps reflect control premiums, trading comps do not
C. Trading comps are based on private companies, transaction comps are not
D. Both measure the exact same multiples
Answer: B. Transaction comps reflect control premiums, trading comps do
not
Q6.
If a precedent transaction had EV = $800M and LTM EBITDA = $100M, what
was the EV/EBITDA multiple?
A. 6x
B. 8x
C. 10x
D. 12x
Answer: B. 8x
Rationale: $800M ÷ $100M = 8x.
, Q7.
Which of the following is a limitation of transaction comps?
A. They are unaffected by market conditions
B. Data may be unavailable or limited
C. They always undervalue targets
D. They rely on forward-looking projections
Answer: B. Data may be unavailable or limited
Rationale: Many deals, especially private ones, do not disclose full financial
details.
Q8.
What does “calendarization” of financials in transaction comps ensure?
A. EBITDA reflects synergies
B. Multiples are comparable across different fiscal year-ends
C. Adjustments for debt repayment are included
D. Net income is tax-adjusted
Answer: B. Multiples are comparable across different fiscal year-ends
Q9.
If the acquirer paid a 30% premium to the target’s unaffected share price, what
does this indicate?
A. The deal was hostile
B. The acquirer overpaid
TRANSACTION COMPS MODELING WALL STREET
PREP EXAM | QUESTIONS AND CORRECT ANSWERS
GRADED A+ | LATEST UPDATE
Q1.
In transaction comps analysis, what is the primary purpose of including a control
premium?
A. To reflect synergies realized by the buyer
B. To adjust for market volatility
C. To account for higher ownership concentration
D. To compensate for minority interest
Answer: A. To reflect synergies realized by the buyer
Rationale: Transaction comps often include a premium above trading comps,
reflecting the price acquirers are willing to pay for control and synergies.
Q2.
Which of the following multiples is most commonly used in transaction comps?
A. P/E Ratio
B. EV/EBITDA
C. Price-to-Book
D. Dividend Yield
,Answer: B. EV/EBITDA
Rationale: EV/EBITDA is the most widely used because it’s capital structure-
neutral and compares operating performance across companies.
Q3.
When building a transaction comps model, what is the first step?
A. Gather deal multiples from precedent databases
B. Select a universe of comparable transactions
C. Normalize EBITDA
D. Calculate synergies
Answer: B. Select a universe of comparable transactions
Rationale: The first step is to screen for and identify relevant precedent
transactions.
Q4.
Why is EV/Revenue sometimes used instead of EV/EBITDA in precedent
transactions?
A. EBITDA may not be available or reliable
B. It better captures working capital efficiency
C. It accounts for tax rate differences
D. It eliminates goodwill adjustments
,Answer: A. EBITDA may not be available or reliable
Rationale: For early-stage or low-profit companies, revenue multiples are often
the only usable measure.
Q5.
Which of the following best explains the difference between trading comps and
transaction comps?
A. Trading comps include synergies, transaction comps do not
B. Transaction comps reflect control premiums, trading comps do not
C. Trading comps are based on private companies, transaction comps are not
D. Both measure the exact same multiples
Answer: B. Transaction comps reflect control premiums, trading comps do
not
Q6.
If a precedent transaction had EV = $800M and LTM EBITDA = $100M, what
was the EV/EBITDA multiple?
A. 6x
B. 8x
C. 10x
D. 12x
Answer: B. 8x
Rationale: $800M ÷ $100M = 8x.
, Q7.
Which of the following is a limitation of transaction comps?
A. They are unaffected by market conditions
B. Data may be unavailable or limited
C. They always undervalue targets
D. They rely on forward-looking projections
Answer: B. Data may be unavailable or limited
Rationale: Many deals, especially private ones, do not disclose full financial
details.
Q8.
What does “calendarization” of financials in transaction comps ensure?
A. EBITDA reflects synergies
B. Multiples are comparable across different fiscal year-ends
C. Adjustments for debt repayment are included
D. Net income is tax-adjusted
Answer: B. Multiples are comparable across different fiscal year-ends
Q9.
If the acquirer paid a 30% premium to the target’s unaffected share price, what
does this indicate?
A. The deal was hostile
B. The acquirer overpaid
