Question

The most popular methods of valuation used for mergers and acquisitions are earnings multiples and discounted...

The most popular methods of valuation used for mergers and acquisitions are earnings multiples and discounted cash flows.

True

False

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The answer would be True

We would need to understand the above two methods of Mergers and Acquisitions to make the answer more clear for understanding

Discounted Cash Flows method : In this method a company would be valued on the basis of Present Value of Future cash flows that it would generate. To get the present value of Future cash flows we would use the Weighted Average Cost of Capital.

Earnings Multiples : Price Earnings can be simply defined as the price that the investors would be willing to pay for stocks on the basis of its earnings. Wiht the use of Price Earnings ratio the acquiring firm can value the price of its shares after merger and determine whether they would benefit themselves from Mergers and Acquisitions or incur a loss. In other words Acquiring firm would be able to determine whether Post Merger Share Prices have gone up or down.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
An analyst tells you that he uses price/earnings multiples, rather than discounted cash flow valuation, to...
An analyst tells you that he uses price/earnings multiples, rather than discounted cash flow valuation, to value stocks, because he does not like making assumptions about fundamentals - growth, risk, and payout ratios. Is his reasoning correct?
The cash flows used to analyze Mergers & Acquisitions: Group of answer choices Are before tax....
The cash flows used to analyze Mergers & Acquisitions: Group of answer choices Are before tax. Are the same as those used in regular capital budgeting analysis. Exclude interest and depreciation on a before-tax basis; and then adds back depreciation and subtracts retained earnings. Generally do not account for revenue and expenses. Both C and D.
Which one of the following methods might NOT provide a reasonable startup valuation (choose one)? a....
Which one of the following methods might NOT provide a reasonable startup valuation (choose one)? a. Estimate of the startup’s exit value and timing, discounted to present b. Exit values of similar companies, standardized to multiples such as earnings, size, or enterprise value, and applied to the startup’s multiples c. Projected future company profits, discounted to present d. Projected future cash flows, discounted to present e. Negotiations with many VCs leading to a term sheet a lot of these VCs...
Which one of the following methods might NOT provide a reasonable startup valuation (choose one)? a....
Which one of the following methods might NOT provide a reasonable startup valuation (choose one)? a. Estimate of the startup’s exit value and timing, discounted to present b. Exit values of similar companies, standardized to multiples such as earnings, size, or enterprise value, and applied to the startup’s multiples c. Projected future company profits, discounted to present d. Projected future cash flows, discounted to present e. Negotiations with many VCs leading to a term sheet a lot of these VCs...
Discounted cash flow valuation is based upon the notion that the value of an asset is...
Discounted cash flow valuation is based upon the notion that the value of an asset is the present value of the expected cash flows on that asset, discounted at a rate that reflects the riskiness of those cash flows. Specify whether the following statements about discounted cash flow valuation are true or false, assuming that all variables are constant except for the variable discussed below: As the discount rate increases, the value of an asset increases. As the expected growth...
Considering the valuation of mergers, which of the following is NOT correct? A. In a merger...
Considering the valuation of mergers, which of the following is NOT correct? A. In a merger with true synergies, the post-merger value exceeds the sum of the separate companies' pre-merger values. B. Only if a target firm's value is greater to the acquiring firm than its market value as a separate entity will a merger be financially justified. C. If the capital structure is stable, and free cash flows are expected to be growing at a constant rate at the...
State one advantage and one disadvantage of both the dividend valuation and the price-earnings valuation methods...
State one advantage and one disadvantage of both the dividend valuation and the price-earnings valuation methods used to valueshares
Which of the following statements is most accurate: A. Discounted Cash Flow analysis models provide conclusions...
Which of the following statements is most accurate: A. Discounted Cash Flow analysis models provide conclusions associated with Fair Value Hierarchy Level 1 inputs. B. Price / Earnings multiples directly provide insights into the total company, the TEV. C. Generally, (EBIT) and (EBITDA) multiples directly provide insight into the equity value. D. Price / Earnings multiples provide insights into the value of the equity.
18 In most capital budgeting decisions the emphasis should be on reported earnings rather than cash...
18 In most capital budgeting decisions the emphasis should be on reported earnings rather than cash flows. True / False
Which of the following statements is FALSE? A. The most common valuation multiple is the price-earnings...
Which of the following statements is FALSE? A. The most common valuation multiple is the price-earnings (P/E) ratio. B. You should be willing to pay proportionally more for a stock with lower current earnings. C. A firm's P/E ratio is equal to the share price divided by its earnings per share. D. The intuition behind the use of the P/E ratio is that when you buy a stock, you are in sense buying the rights to the firm's future earnings...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT