CEPA (Certified Exit Planning Advisor) EXAM
COURSE STUDY QUESTIONS WITH ACCURATE
SOLUTIONS A+ VERIFIED 2025 GUIDE
In a calculation of value exercise, you have determined that your client's
business value is $15,000,000. What amount of this is likely tied to the
4Cs?
$12,000,000
Explain why financial buyers (private equity groups) are now paying as
much, if not more, than strategic buyers for target companies?
b. Private equity groups have access to huge amounts of capital
c. Many private equity groups can realize synergies as they make acquisitions
to help their portfolio companies grow
d. both b and c (correct)
What is a Hold or Recapitalization Exit Strategy?
A business owner takes on additional debt or equity to create personal
liquidity and to diversify risk
Multiples exceeding 5x trailing earnings generally require:
Growth rate justification
Synergies justification
The Greater Fool Justification
all of the above(correct)
What is the first step in the Decide gate of the Value Acceleration
Methodology?
Ask if you want to keep growing or if you want to exit
,A business you are working with is doing $20,000,000 in adjusted gross
sales and adjusted EBITDA is 10% to sales. Based on this financial
performance and the personal, financial, business assessment recently
completed, it has been determined the market multiple for this business
is 5x adjusted EBITDA. Best in class companies in this industry are
performing at 15% adjusted EBITDA to sales and are trading at 8x adjusted
EBITDA. What is this companies profit gap?
$1,000,000
Assume your client Jim, owns a company that manufactures heavy duty
steel shelving for warehouse and distribution centers. Jim is 70 years old.
One of his goals is to maximize the selling price of his company at the time
of sale. The company has revenues of $18 million and pre-tax income of
$2 million. The company has no debt and all of its assets have been fully
depreciated. Jim pays himself a salary of $1 million. A buyer couple hires
a CEO to do Jim's job for approximately $250,000. Jim's wife, Sarah, is 60
years old and is listed on the payroll as office manager, but she only
comes into the office once every couple of weeks. Sarah receives a salary
of $75,000. Jim and his wife expense approximately $80,000 in personal
items through the business. Assume that buyers of companies like this
expect a 25% rate of return on their investments. What is the best
earnings stream to use to value this company
Adjusted EBITDA
Assume your client Jim, owns a company that manufactures heavy duty
steel shelving for warehouse and distribution centers. Jim is 70 years old.
One of his goals is to maximize the selling price of his company at the time
of sale. The company has revenues of $18 million and pre-tax income of
$2 million. The company has no debt and all of its assets have been fully
depreciated. Jim pays himself a salary of $1 million. A buyer couple hires
a CEO to do Jim's job for approximately $250,000. Jim's wife, Sarah, is 60
,years old and is listed on the payroll as office manager, but she only
comes into the office once every couple of weeks. Sarah receives a salary
of $75,000. Jim and his wife expense approximately $80,000 in personal
items through the business. Assume that buyers of companies like this
expect a 25% rate of return on their investments. What multiple of
adjusted earnings should be used to determine the selling price of this
company?
Jim should not set the selling price of the business in advance. Rather, he
should let the market determine the selling price through a controlled auction
Assume your client Jim, owns a company that manufactures heavy duty
steel shelving for warehouse and distribution centers. Jim is 70 years old.
One of his goals is to maximize the selling price of his company at the time
of sale. The company has revenues of $18 million and pre-tax income of
$2 million. The company has no debt and all of its assets have been fully
depreciated. Jim pays himself a salary of $1 million. A buyer couple hires
a CEO to do Jim's job for approximately $250,000. Jim's wife, Sarah, is 60
years old and is listed on the payroll as office manager, but she only
comes into the office once every couple of weeks. Sarah receives a salary
of $75,000. Jim and his wife expense approximately $80,000 in personal
items through the business. Assume that buyers of companies like this
expect a 25% rate of return on their investments. What is the ball park
value (no need to do a discounted cash flow analysis) for Jim's business?
A
$11,620,000
Assume your client Jim, owns a company that manufactures heavy duty
steel shelving for warehouse and distribution centers. Jim is 70 years old.
One of his goals is to maximize the selling price of his company at the time
of sale. The company has revenues of $18 million and pre-tax income of
$2 million. The company has no debt and all of its assets have been fully
, depreciated. Jim pays himself a salary of $1 million. A buyer couple hires
a CEO to do Jim's job for approximately $250,000. Jim's wife, Sarah, is 60
years old and is listed on the payroll as office manager, but she only
comes into the office once every couple of weeks. Sarah receives a salary
of $75,000. Jim and his wife expense approximately $80,000 in personal
items through the business. Assume that buyers of companies like this
expect a 25% rate of return on their investments. What would you advise
Jim to expect in terms of a reasonable transaction structure?
Impossible to say
Jim has told you he would like to sell his company next year. Jim has also
confided in you that he isn't sure that the value of the business will be
enough for him to retire comfortably. After gentle probing Jim tells you
that he needs to be able to generate $1 million a year before taxes in order
to continue supporting his lifestyle. Jim plans to invest the proceeds of the
sale in CD's and Treasuring Bills, which will yield 4%-5% return to protect
his capital and generate retirement cash flow. Jim is also concerned that if
he and his wife start to travel and buy a home in the mountains, their
spending may actually increase, rather than decrease in retirement.
Assume Jim's business sells for $12 million in a stock sale. Assume that
he receives 80% of the purchase price at closing and the rest in the form
of a seller note. The note has a term of four years and bears an annual
interest at 10%. Jim's company is a sub-S Corporation founded 10 years
ago. The tax basis in the company is zero. Jim has to pay off $3 million in
bank debt so he can transfer the company free and clear of all
encumbrances. Assume that Jim's effective tax rate is 35% and the
capital gains tax rate is 15%. Disregard the impact of state and local taxes
for this question. Based on these facts please answer the following
questions. Assuming Jim's business sells for $12 million, what are the
capital gains taxes that Jim would have to pay at closing?
COURSE STUDY QUESTIONS WITH ACCURATE
SOLUTIONS A+ VERIFIED 2025 GUIDE
In a calculation of value exercise, you have determined that your client's
business value is $15,000,000. What amount of this is likely tied to the
4Cs?
$12,000,000
Explain why financial buyers (private equity groups) are now paying as
much, if not more, than strategic buyers for target companies?
b. Private equity groups have access to huge amounts of capital
c. Many private equity groups can realize synergies as they make acquisitions
to help their portfolio companies grow
d. both b and c (correct)
What is a Hold or Recapitalization Exit Strategy?
A business owner takes on additional debt or equity to create personal
liquidity and to diversify risk
Multiples exceeding 5x trailing earnings generally require:
Growth rate justification
Synergies justification
The Greater Fool Justification
all of the above(correct)
What is the first step in the Decide gate of the Value Acceleration
Methodology?
Ask if you want to keep growing or if you want to exit
,A business you are working with is doing $20,000,000 in adjusted gross
sales and adjusted EBITDA is 10% to sales. Based on this financial
performance and the personal, financial, business assessment recently
completed, it has been determined the market multiple for this business
is 5x adjusted EBITDA. Best in class companies in this industry are
performing at 15% adjusted EBITDA to sales and are trading at 8x adjusted
EBITDA. What is this companies profit gap?
$1,000,000
Assume your client Jim, owns a company that manufactures heavy duty
steel shelving for warehouse and distribution centers. Jim is 70 years old.
One of his goals is to maximize the selling price of his company at the time
of sale. The company has revenues of $18 million and pre-tax income of
$2 million. The company has no debt and all of its assets have been fully
depreciated. Jim pays himself a salary of $1 million. A buyer couple hires
a CEO to do Jim's job for approximately $250,000. Jim's wife, Sarah, is 60
years old and is listed on the payroll as office manager, but she only
comes into the office once every couple of weeks. Sarah receives a salary
of $75,000. Jim and his wife expense approximately $80,000 in personal
items through the business. Assume that buyers of companies like this
expect a 25% rate of return on their investments. What is the best
earnings stream to use to value this company
Adjusted EBITDA
Assume your client Jim, owns a company that manufactures heavy duty
steel shelving for warehouse and distribution centers. Jim is 70 years old.
One of his goals is to maximize the selling price of his company at the time
of sale. The company has revenues of $18 million and pre-tax income of
$2 million. The company has no debt and all of its assets have been fully
depreciated. Jim pays himself a salary of $1 million. A buyer couple hires
a CEO to do Jim's job for approximately $250,000. Jim's wife, Sarah, is 60
,years old and is listed on the payroll as office manager, but she only
comes into the office once every couple of weeks. Sarah receives a salary
of $75,000. Jim and his wife expense approximately $80,000 in personal
items through the business. Assume that buyers of companies like this
expect a 25% rate of return on their investments. What multiple of
adjusted earnings should be used to determine the selling price of this
company?
Jim should not set the selling price of the business in advance. Rather, he
should let the market determine the selling price through a controlled auction
Assume your client Jim, owns a company that manufactures heavy duty
steel shelving for warehouse and distribution centers. Jim is 70 years old.
One of his goals is to maximize the selling price of his company at the time
of sale. The company has revenues of $18 million and pre-tax income of
$2 million. The company has no debt and all of its assets have been fully
depreciated. Jim pays himself a salary of $1 million. A buyer couple hires
a CEO to do Jim's job for approximately $250,000. Jim's wife, Sarah, is 60
years old and is listed on the payroll as office manager, but she only
comes into the office once every couple of weeks. Sarah receives a salary
of $75,000. Jim and his wife expense approximately $80,000 in personal
items through the business. Assume that buyers of companies like this
expect a 25% rate of return on their investments. What is the ball park
value (no need to do a discounted cash flow analysis) for Jim's business?
A
$11,620,000
Assume your client Jim, owns a company that manufactures heavy duty
steel shelving for warehouse and distribution centers. Jim is 70 years old.
One of his goals is to maximize the selling price of his company at the time
of sale. The company has revenues of $18 million and pre-tax income of
$2 million. The company has no debt and all of its assets have been fully
, depreciated. Jim pays himself a salary of $1 million. A buyer couple hires
a CEO to do Jim's job for approximately $250,000. Jim's wife, Sarah, is 60
years old and is listed on the payroll as office manager, but she only
comes into the office once every couple of weeks. Sarah receives a salary
of $75,000. Jim and his wife expense approximately $80,000 in personal
items through the business. Assume that buyers of companies like this
expect a 25% rate of return on their investments. What would you advise
Jim to expect in terms of a reasonable transaction structure?
Impossible to say
Jim has told you he would like to sell his company next year. Jim has also
confided in you that he isn't sure that the value of the business will be
enough for him to retire comfortably. After gentle probing Jim tells you
that he needs to be able to generate $1 million a year before taxes in order
to continue supporting his lifestyle. Jim plans to invest the proceeds of the
sale in CD's and Treasuring Bills, which will yield 4%-5% return to protect
his capital and generate retirement cash flow. Jim is also concerned that if
he and his wife start to travel and buy a home in the mountains, their
spending may actually increase, rather than decrease in retirement.
Assume Jim's business sells for $12 million in a stock sale. Assume that
he receives 80% of the purchase price at closing and the rest in the form
of a seller note. The note has a term of four years and bears an annual
interest at 10%. Jim's company is a sub-S Corporation founded 10 years
ago. The tax basis in the company is zero. Jim has to pay off $3 million in
bank debt so he can transfer the company free and clear of all
encumbrances. Assume that Jim's effective tax rate is 35% and the
capital gains tax rate is 15%. Disregard the impact of state and local taxes
for this question. Based on these facts please answer the following
questions. Assuming Jim's business sells for $12 million, what are the
capital gains taxes that Jim would have to pay at closing?
