Wall Street Virtual Academy Investment Banking Homework Assignment

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Wall Street Virtual Academy Investment Banking Homework Assignment

This homework is to assess your knowledge of an LBO model.


Questions and Answers
  • 1. 
    Your name 
  • 2. 
    Your email (please use the one you registered with)
  • 3. 
    What school do you attend? 
  • 4. 
    When determining the purchase price of an LBO target, a private equity firm would most likely consider:
    • A. 

      Public trading comparables

    • B. 

      Precedent transactions

    • C. 

      Projected revenue growth

    • D. 

      The ability of the target company to generate cash and repay its debt

    • E. 

      All of the above

  • 5. 
    Which of the following are normally included when calculating Enterprise Value?
    • A. 

      Cash, Debt and Equity

    • B. 

      Goodwill and intangible assets

    • C. 

      Property, plant and equipment

    • D. 

      Inventory

  • 6. 
    All else being equal, what would happen to the investor's IRR if they completed the LBO using Senior Debt of 3.0x LTM EBITDA instead of 4.0x?
    • A. 

      IRR would not be affected

    • B. 

      IRR would increase

    • C. 

      IRR would decrease

  • 7. 
    Why does Senior Debt Interest Expense decline over time in the model?
    • A. 

      The interest rate (as a %) declines over time

    • B. 

      The amount of debt outstanding declines over time

    • C. 

      Senior Debt Interest Expense does not decline

    • D. 

      Waste Management decides not to pay

  • 8. 
    In the Base Case model, the investor earns a Multiple of Investment investment in Year 5 of:
    • A. 

      2.1x

    • B. 

      1.8x

    • C. 

      2.3x

    • D. 

      2.0x

  • 9. 
    What is the highest price the investor could pay in the Base Case and still earn an IRR of 15% at exit in Year 5?
    • A. 

      8.5x

    • B. 

      8.8x

    • C. 

      9.0x

    • D. 

      9.3x