Guided Walkthroughs
Accretion/Dilution — Step 8 of 8: Give the one-minute recap — the framework you'd state for any accretion/dilution question.
Model answer
"Accretion/dilution compares pro-forma EPS to the acquirer's standalone EPS. Build pro-forma earnings: acquirer + target net income, minus the after-tax cost of financing — foregone interest on cash,…
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More from Guided Walkthroughs
- Full DCF — Step 1 of 12: Set up the model. SteadyCo has $100M of revenue in Year 0. What operating assumptions do you need before you can project unlevered free cash flow, and what are ours?
- Full DCF — Step 2 of 12: Project SteadyCo's revenue and EBITDA for Years 1–5.
- Full DCF — Step 3 of 12: From EBITDA, get to EBIT and NOPAT for each year. Why does a DCF tax EBIT rather than pre-tax income?
- Full DCF — Step 4 of 12: State the unlevered FCF formula and compute Year 1 unlevered FCF for SteadyCo.
- Full DCF — Step 5 of 12: Complete the 5-year unlevered FCF projection.
- Full DCF — Step 6 of 12: Build SteadyCo's cost of equity. Inputs: risk-free rate 4.0%, equity risk premium 5.0%, levered beta 1.4.