Assume that Acquirer pays $90 million to purchase $75 million in net acquired assets, consisting of $100 million of Target net property, plant and equipment (i.e., Net PP&E) less assumed Target current liabilities of $25 million and that the book values of Target assets and liabilities are equal to their fair market value. The implied purchase price multiple is
A) 1.2 times net acquired assets
B) 1.7 times net acquired assets
C) 3.4 times net acquired assets
D) .2 times net acquired assets
E) None of the above

Question

Quizplus · Accepted Answer

The implied purchase price multiple is calculated by dividing the purchase price by the net acquired assets. Here, the purchase price is $90 million, and the net acquired assets are $75 million ($100 million of Net PP&E minus $25 million of assumed liabilities). Therefore, the implied purchase price multiple is $90 million / $75 million = 1.2 times net acquired assets.

Assume That Acquirer Pays $90 Million to Purchase $75 Million