Breaking Into Wall Street Already Passed

Reverse Merger Purchase Price Allocation {Ans: = Equity Purchase Price - book value of seller (as of the deal close date) - write off existing Goodwill and other write-ups Can look at comparable deals for estimating any write-ups}Enterprise Value (TEV) {Ans: 2 ways to calculate: 1) = equity value - non-operating assets + L&E items that represent other investors 2) operational assets - operational liabilities Net operational assets to all investors (equity, debt, preferred)}Funds required in an LBO {Ans: Not paying the EV or TEV of a company - depends on the treatment of existing debt, cash, and fees = Equity Purchase Price + Any Debt Refinanced - Excess Cash Used - Equity Rollover Equity rollover reduces the amount of equity that the PE firm contributes}Financial Statement Walk-Through After 1 year from raising $100 of debt to buy factories... Assumptions: 10% depreciation ($10), 5% interest expense ($5), 10% principal repayment ($10) {Ans: IS: - Depreciation increases by $10 - Interest expense increases by $5 - Pre-tax income decreases by $15, net income decreases by $9 CFS: - Net income decreases by $9 - CFO / depreciation is added back at $10 - CFF / debt principal