Practice Problems

Investment Banking

By: Hyder Ali Khawaja

1. ABC Corporation has 50 million basic shares outstanding. Company has also issued 5
million options at a strike price of $22. If shares are currently traded at $25 calculate fully diluted shares outstanding using treasury stock method.

2. Shares of ABC Corporation are currently traded at $50. Company has basic shares
outstanding of 200 millions and also has 10 million options. Options are exercisable at a price of $45. If company has earnings of $500 million calculate fully diluted earning per share.

3. ABC Corporation has 100 million basic shares outstanding. Company has also issued 10
million options at a strike price of $34. If shares are currently traded at $40 calculate fully diluted shares outstanding using treasury stock method.

4. ABC Corporation has 120 million basic shares outstanding. Company has also issued
0.15 million convertible bonds having Par Value of $1000 which are converible at a conversion price of $15. Company has also issued 12 million options at a strike price of $34. If shares are currently traded at $45 calculate fully diluted shares outstanding.

5. ABC Corporation has 120 million basic shares outstanding. Company has also issued
convertible debt of $120 million having conversion price of $10. Company has also issued 12 million options at a strike price of $34. If shares are currently traded at $45 calculate fully diluted shares outstanding.

6. ABC Corporation has 100 million basic shares outstanding. Company has also issued
0.15 million convertible bonds having Par Value of $1000 which are converible at a conversion price of $15. Calculate fully diluted shares outstanding using if converted method.

7. ABC Corporation has 500 million basic shares outstanding. Company has also issued
convertible debt of $120 million having conversion price of $10. Calculate fully diluted shares outstanding using if converted method.

8. Shares of ABC Corporation are currently traded at $70. Company has basic shares
outstanding of 500 millions and also has 70 million options. Options are exercisable at a price of $55. If company has earnings of $800 million calculate fully diluted earning per share.

9. Calculate Last Twelve Month Sales

2009 Q1 31 March Q2 Q3 30 June 30 Sep 200 Millions 140 Millions Q4 31 Dec Q1 31 March 2010 Q2 30 June 165 Millions Q3 30 Sep

Practice Problems

Investment Banking

By: Hyder Ali Khawaja

10. Calculate Last Twelve Month Sales

2009 Q1 31 March Q2 Q3 30 June 30 Sep 400 Millions 290 Millions Q4 31 Dec Q1 31 March 2010 Q2 30 June 330 Millions Q3 30 Sep

11. ABC Corporation has following data;

Equity $500 Million Enterprise Value $800 EBIT $100 Million Depreciation & Amortization $20 Million Net Income $80 Million Sales $200 Million Calculate trading multiples (Equity & Enterprise Value based) using N.I, EBIT, EBITDA and Sales

12. ABC Corporation has following data;

Equity $800 Million Enterprise Value $1200 EBIT $200 Million Depreciation & Amortization $30 Million Net Income $150 Million Sales $350 Million Calculate trading multiples (Equity & Enterprise Value based) using N.I, EBIT, EBITDA and Sales

13. Calculate implied share price for given financial data; (figures in millions)
2008E 2009E 2010E EBITDA $300 $320 $345 Multiple Range 6.5x 7.5x 6.0x 7.0x 5.5x 6.5x Debt 500 500 500 Fully Diluted Shares 100 100 100

14. Calculate implied share price for given financial data; (figures in millions)
2008E 2009E 2010E EBITDA $290 $310 $335 Multiple Range 5.5x 6.5x 5.0x 6.0x 4.5x 5.5x Debt 450 450 450 Fully Diluted Shares 110 110 110

Practice Problems

Investment Banking

By: Hyder Ali Khawaja

15. Calculate implied share price and enterprise value for given financial data; (figures in
millions) 2008E 2009E 2010E Net Income $90 $110 $125 Multiple Range 12x 15x 11x 14x 10x 13x Debt 450 450 450 Fully Diluted Shares 100 100 100

16. Calculate implied share price and enterprise value for given financial data; (figures in
millions) 2008E 2009E 2010E Net Income $60 $70 $85 Multiple Range 11x 14x 10x 13x 9x 12x Debt 300 300 300 Fully Diluted Shares 100 100 100

17. ABC Company has raised $200 million via debt and $300 million via equity. If firm has
in a tax bracket of 30%, rate of debt is 13% and its beta is 1.3. If return on treasury bills is 5% and market rate of return is 10%. Calculate weighted average cost of capital.

18. ABC Company has raised $500 million via debt and $350 million via equity. If firm has
in a tax bracket of 40%, rate of debt is 16% and its beta is 1.45. If return on treasury bills is 6% and market rate of return is 13%. Calculate weighted average cost of capital.

19. ABC Company has raised $250 million via debt and $600 million via equity. If firm has
in a tax bracket of 28%, rate of debt is 15% and beta of any unlevered firm is 0.9. If return on treasury bills is 7% and market rate of return is 12%. Calculate weighted average cost of capital.

20. ABC Company has raised $275 million via debt and $450 million via equity. If firm has
in a tax bracket of 28%, rate of debt is 15% and beta of any unlevered firm is 0.85. If return on treasury bills is 8% and market rate of return is 14%. Calculate weighted average cost of capital.

21. ABC Company wants to acquire XYZ Company. ABCs stock is trading at $48 where as
ABC offers a price of $12 per share to XYZ. How many shares of XYZ are required to get one share of ABC Company?

22. ABC Company wants to acquire XYZ Company. ABCs stock is trading at $50 where as
ABC offers a price of $16.6 per share to XYZ. If a person has 600 shares of XYZ, how many shares of ABC Company will he get?

Practice Problems

Investment Banking

By: Hyder Ali Khawaja

23. MCB wants to acquire HBL and offers a price of $20 per share, if an unaffected share
price is $15 find premium paid by MCB.

24. ABC wants to acquire XYZ and offers a price of $35 per share, if an unaffected share
price is $32 find premium paid by ABC.

25. Calculate enterprise value from following data;

Equity $200 Debt $150 Preferred Stock $80 Noncontrolling Interest Cash & cash equavalent

$65 $35

26. Calculate enterprise value from following data;

Equity $500 Debt $250 Preferred Stock $180 Noncontrolling Interest Cash & cash equavalent

$265 $135