FIN 461 EXAM 2 (LATEST)
QUESTIONS WITH COMPLETE
SOLUTIONS!!
1 of 69
Definition
PE funds have a 10-12 year life
holding periods for investments are around 5 years
Give this one a try later!
Private equity IPO investors
restricted stock PE Exit timing
, Don't know?
2 of 69
Definition
Can take accounting actions to present results differently
and make earnings look better or worse
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Fundamental flaw of A method to increase
accretion
shareholder dividends
/ dilution
An approach to reduce A strategy for expanding
operational costs market share
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3 of 69
Definition
Difference between new investments and exits, which leads
to an increase in the number of companies in PE firms'
portfolios
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, Lbo exit / monetization strategies Exit overhang
Private equity Leveraged buyouts
Don't know?
4 of 69
Definition
- paid in kind
- can satisfy interest by borrowing more
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LBO key participants steve asks for $10k for a 25%
stake....
what do PE firms do? LBO: PIK
Don't know?
5 of 69
Definition
Cash is used to settle the entire issue. No new shares are
issued under this settlement method.
, Give this one a try later!
Cash settlement method attractive LBO candidates
Fund of funds If converted method
Don't know?
6 of 69
Term
"go shop" and termination fee in an LBO
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- dilution
- the shares worth 31 in the case of Rosetta Stone were sold for 16
- this is one of the disadvantages of an IPO
- investors don't like when the price of shares goes down and
hurts existing shareholders
- however, deals are often tolerable if they are expected to be
accretive in year 2
- go shop = board is allowed to shop around for 45 days to see
if they can find a better deal
- termination fee = amount paid by buyers to sellers if the deal falls
through
QUESTIONS WITH COMPLETE
SOLUTIONS!!
1 of 69
Definition
PE funds have a 10-12 year life
holding periods for investments are around 5 years
Give this one a try later!
Private equity IPO investors
restricted stock PE Exit timing
, Don't know?
2 of 69
Definition
Can take accounting actions to present results differently
and make earnings look better or worse
Give this one a try later!
Fundamental flaw of A method to increase
accretion
shareholder dividends
/ dilution
An approach to reduce A strategy for expanding
operational costs market share
Don't know?
3 of 69
Definition
Difference between new investments and exits, which leads
to an increase in the number of companies in PE firms'
portfolios
Give this one a try later!
, Lbo exit / monetization strategies Exit overhang
Private equity Leveraged buyouts
Don't know?
4 of 69
Definition
- paid in kind
- can satisfy interest by borrowing more
Give this one a try later!
LBO key participants steve asks for $10k for a 25%
stake....
what do PE firms do? LBO: PIK
Don't know?
5 of 69
Definition
Cash is used to settle the entire issue. No new shares are
issued under this settlement method.
, Give this one a try later!
Cash settlement method attractive LBO candidates
Fund of funds If converted method
Don't know?
6 of 69
Term
"go shop" and termination fee in an LBO
Give this one a try later!
- dilution
- the shares worth 31 in the case of Rosetta Stone were sold for 16
- this is one of the disadvantages of an IPO
- investors don't like when the price of shares goes down and
hurts existing shareholders
- however, deals are often tolerable if they are expected to be
accretive in year 2
- go shop = board is allowed to shop around for 45 days to see
if they can find a better deal
- termination fee = amount paid by buyers to sellers if the deal falls
through
