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Which of the following best describes a best efforts underwriting commitment?

Underwriter commits to selling as much of the issue as possible at the agreed-on offering price but can return any unsold shares to the issuer without financial responsibility.

Underwriter is only responsible for half (50%) of the issue. 

The underwriter agrees to buy the entire issue and assume full financial responsibility for any unsold shares.

If the entire issue cannot be sold at the offering price, the deal is called off and the issuing company receives nothing.


Free Cash Flow


Growth rate


Tax Rate


Cost of Capital


Debt-to-total value


Given the data in the above table, what is the terminal value of the business (using the growing perpetuity formula)?










Tax Rate


Discount Rate


Enterprise Value


Perpetual Growth Rate


Given the data in the above table, calculate market capitalization of this hypothetical company. 






Cost of Equity


Cost of debt


Debt-to-equity ratio


Given the data in the above table, what is the weighted average cost of capital of this company?






Which of the following companies has the lowest degree of leverage?

20% Debt, 80% Equity

90% Debt, 10% Equity

50% Debt, 50% Equity

30% Debt, 70% Equity


Which of the following statements is correct?

Financial buyers are operating partners that try to create synergies.

Financial buyers are institutions that provide capital and are not operators.

Strategic buyers are institutions that provide capital and are not operators.

Strategic buyers are asset managers that are trying to time the purchase or sale of a business.


Which of the following is the correct ordering of the capital stack (from most secure to least secure)?

Senior debt -> Equity -> Subordinated debt

Senior debt -> Subordinated debt-> Equity

Subordinated debt -> Senior debt -> Equity

Equity -> Subordinated debt -> Senior debt


Which of the following debt repayment profiles involves a growing principal amount over time?

Pay in kind debt

Senior Debt

Mezzanine finance



Which of the following statements about capital structure are correct? Select ALL correct answers.

A company should always finance its business using as much debt as possible in order to optimize the capital structure.

Having too little debt may increase the risk of default in repayment.

Having too much equity may dilute earnings and the value of the original investors.

A company needs to consider the current economic climate when making decisions on debt and equity proportions.


Which of the following is NOT a form of subordinated debt?

Payment-In-Kind Notes

High yield bonds


Vendor Notes


Which of the following best describes a leveraged buyout fund’s acquisitions?

Investing in foreign businesses

Investing in mid-sized businesses

Investing in mature businesses

Investing in early stage businesses


Which of the following are examples of institutional investors? Select ALL correct answers.

High net worth individuals

Private equity firms

Mutual funds

Companies that are publicly traded on stock exchanges


Which of the following is not a function of public accounting firms?


Financial Planning & Analysis

Due dilligence

Transaction Advisory


Which of the following M&A transaction equations is correct?

Value created = Stand-alone value + Net synergies – Consideration (price paid)

Value created = Hard synergies + Soft synergies – Transaction costs

Value created = Stand-alone value + Net synergies – Transaction costs

Value created = Consideration (price paid) + Net synergies – Transaction costs


What should a company do if it wants to reduce the number of shares outstanding?

Issue more debt

Invest in more projects

Pay cash dividends

Repurchase shares


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