Instructor key — Module 6: Course 4 Capstone: Negotiating the Acquisition of Apex Fire & Security
Instructor/solutions version. Keep separate from the student assignment during assessment.
Calculation solution
Immediate cash $2.8m, later adjustment release $40,000, indemnity escrow $150,000 with a $35,000 paid claim, and note $250,000. Calculate total nominal seller receipts.
Calculated result: 3,205,000.00000000 (actual USD, except where the question requests a ratio or return). Add actual or stipulated receipts once; the claim consumes escrow rather than reducing immediate cash again. Use appropriate display rounding while retaining formula precision. This result is generated from the independent assignment inputs, not copied from the chapter answer.
Conceptual and judgment marking
A complete conceptual response identifies the measure's economic purpose, the defined perimeter and the risk of confusing it with another metric. Award up to 20 points for explanation, not terminology alone. For the applied question, award up to 15 for linking evidence to a concrete acquisition consequence; do not require an optimistic recommendation.
Spreadsheet marking
Award 15 of the 30 spreadsheet points for live links from assumptions, 10 for a coherent 10% mutation and predicted direction, and 5 for units, readable formatting and checks. Inspect formulas directly rather than accepting cached numbers. Use the instructor workbook for the controlling capstone model; this independent lab uses different inputs.
Calculation marking: 10 points for the correct equation/perimeter, 15 for intermediate arithmetic, and 10 for result, units and rounding. Overall pass requires 80 and all critical checks in the student version.
Original chapter practice solutions
The following solutions were moved out of the chapter so full answers no longer sit immediately below student questions. Match them in order to the chapter's practice problems.
Worked solution: EBITDA is $800,000 from the stated bridge. SDE is $980,000 after adding the $180,000 owner-replacement role back under the disclosed convention. The ratios are 4.75x EBITDA and 3.8776x SDE. Both describe the same $3.8 million operating price; one includes compensation for the owner's job in its earnings denominator.
Worked solution: Uses are $3.72 million + $260,000 + $200,000 + $80,000 = $4.26 million, unchanged from the estimate. The additional price reduction funds the additional missing operating capital. The buyer receives no free $50,000 benefit if the same amount must restore the business, though timing still creates liquidity risk.
Worked solution: Required CFADS is about $555,033.09 using unrounded service. Headroom is $33,034.24. Each dollar of deductible EBITDA loss reduces CFADS by $0.75 in the positive-tax region, so the isolated EBITDA reduction is approximately $44,045.65. This is much smaller than the $180,000 half-account downside. Other stresses can reduce headroom simultaneously.
Worked solution: Recovery is $70,000 − $25,000 = $45,000, subject to the stated cap and other terms. The $50,000 true-up settles the additional closing-capital deficiency beyond the estimate. They address separate economic items under separate mechanisms. If the loss were already reflected in NWC, overlapping recovery would need to be prevented.
Worked solution: The proposal is potential seller earnout consideration and conflicts with the current acquisition prohibition. Remove it, negotiate permissible fixed terms and genuine services, or evaluate a different financing route. A favorable expected value or seller insistence does not make a prohibited structure executable. All consideration must be disclosed and reviewed.