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Q6. In connection with the proposed leveraged buyout, Krager wants to measure The Apple House’s business risk without taking into account its leverage. She must:
A) determine the asset beta.
B) calculate the CAPM IRR.
C) compare historical returns to the target IRR.
Q7. Savannah Walton, a venture-capital analyst for Mixon University’s endowment, is investigating Xavier’s Fine Paper. Management seeks a $12 million investment to fund expansion.
Assuming owners hold 4 million shares and are willing to issue Mixon 5 million shares, Walton should:
A) do the deal, because the buy-in price is $3.0 million below the estimated value.
B) do the deal, because the buy-in price is $9.6 million below the estimated value.
C) not do the deal, because the buy-in price is $2.4 million more than the estimated value.
Q8. A private equity investor makes a $5 million investment in a venture capital firm today. The investor expects to sell the firm in four years. He believes there are three equally possible scenarios at termination:
1. expected earnings will be $20 million, and the expected P/E will be 10.
2. expected earnings will be $7 million, and the expected P/E will be 6.
3. expected earnings will be zero if the firm fails.
The investor believes an IRR of 25% is appropriate. The expected terminal value and the investor’s pre-money valuation, respectively, are closest to (in $ million):
Expected terminal value Pre-money valuation
A) $80.67 $33.04
B) $80.67 $28.04
C) $9.00 $3.69
Q9. The private equity firm Purcell & Hyams (P&H) is considering a $17 million investment in Eizak Biotech. Eizak’s owners firmly believe that with P&H’s investment they could develop their “wonder” drug and sell the firm in six years for $120 million. Given the project’s risk, P&H believes a discount rate of 30% is reasonable.
The pre-money valuation (PRE) and P&H’s fractional ownership, respectively, are closest to (in millions):
PRE Fractional ownership
A) $24.86 0.68
B) $7.86 0.14
C) $7.86 0.68
Q10. A private equity firm makes a $10 million investment in a portfolio company. The founders of a portfolio company currently hold 300,000 shares and the pre-money valuation is $6 million. The number of shares to be held by the private equity firm, and the appropriate share price, respectively, are closest to:
Number of shares Share price
A) 500,000 $20.00
B) 500,000 $32.00
C) 480,000 $20.83
Q11. The private equity firm Purcell & Hyams (P&H) is considering a $17 million investment in Eizak Biotech, of which $10 million is invested today and $7 million in four years. Eizak’s owners firmly believe that with P&H’s investment they could develop their “wonder” drug and sell the firm in six years for $120 million. Given the project’s risk, P&H believes a discount rate of 50% is appropriate for the first four years, and 30% for the last two years. The fractional ownership for first-round investors would be closest to:
A) 0.79.
B) 0.71.
C) 0.27. | 
发表于 2009-3-10 13:06
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