LBO Modeling Exam from Wall Street Prep (2026/2027)
Leveraged Buyout (LBO) Modeling & Analysis | Key Domains: Sources & Uses of Funds, Financial
Statement Projections, Debt Schedule Modeling, IRR & Cash-on-Cash Return Calculations,
Transaction Adjustments & Purchase Price Allocation, and Exit Multiples & Scenarios |
Expert-Aligned Structure | Multiple-Choice & Modeling Exam Format
Introduction
This structured LBO Modeling Exam, aligned with Wall Street Prep's curriculum for 2026/2027,
provides 40 multiple-choice and short-answer modeling questions with correct answers and
rationales. It is designed to rigorously test the technical skills and financial acumen required to
build and analyze a leveraged buyout model, a core competency in investment banking, private
equity, and corporate development.
Exam Structure:
• Technical LBO Modeling Exam: (40 MULTIPLE-CHOICE & MODELING QUESTIONS)
Answer Format
All correct answers, formulas, and financial outputs must appear in bold and cyan blue,
accompanied by concise rationales explaining the modeling step (e.g., "The revolver is used as a
plug to balance the balance sheet"), the calculation logic (e.g., "Exit Equity Value = Exit EBITDA ×
Exit Multiple − Net Debt"), the interconnection between statements (e.g., how depreciation flows
from the income statement to the cash flow statement and balance sheet), the interpretation of a
return metric, and why the alternative multiple-choice options contain formula errors, circular
reference mistakes, or misapplied LBO modeling conventions.
1. In an LBO model, what is the primary purpose of the Sources & Uses table?
A. To forecast future revenue growth
B. To calculate the company’s WACC
C. To show how the transaction is financed (Sources) and where the capital is spent (Uses)
, D. To determine the target’s historical EBITDA margin
Rationale: The Sources & Uses table reconciles total funding (e.g., equity, debt) with total expenditures
(e.g., equity purchase price, fees, refinancing existing debt). It ensures the deal “balances” and clarifies
the capital structure post-transaction.
2. Which of the following is typically included in the “Uses” section of an LBO model?
A. Proceeds from new term loan
B. Sponsor equity contribution
C. Refinancing of existing target debt
D. Interest income from cash
Rationale: “Uses” include the equity purchase price, transaction fees, and repayment of the target’s
existing debt. Sources include new debt and sponsor equity. Refinancing old debt is a use of proceeds,
not a source.
3. What is the correct formula for calculating Enterprise Value (EV) at acquisition in an LBO?
A. Equity Purchase Price + Cash
B. Equity Purchase Price − Net Debt
C. Equity Purchase Price + Net Debt
D. EBITDA × Entry Multiple + Cash
Rationale: EV = Equity Value + Net Debt (Debt − Cash). At acquisition, EV also equals EBITDA × Entry
Multiple. Option C correctly adds net debt to the equity purchase price to derive EV.
4. In purchase price allocation (PPA), how is goodwill calculated?
A. Total Assets − Total Liabilities
B. Fair Value of Identifiable Net Assets − Purchase Price
C. Purchase Price − Fair Value of Identifiable Net Assets
Leveraged Buyout (LBO) Modeling & Analysis | Key Domains: Sources & Uses of Funds, Financial
Statement Projections, Debt Schedule Modeling, IRR & Cash-on-Cash Return Calculations,
Transaction Adjustments & Purchase Price Allocation, and Exit Multiples & Scenarios |
Expert-Aligned Structure | Multiple-Choice & Modeling Exam Format
Introduction
This structured LBO Modeling Exam, aligned with Wall Street Prep's curriculum for 2026/2027,
provides 40 multiple-choice and short-answer modeling questions with correct answers and
rationales. It is designed to rigorously test the technical skills and financial acumen required to
build and analyze a leveraged buyout model, a core competency in investment banking, private
equity, and corporate development.
Exam Structure:
• Technical LBO Modeling Exam: (40 MULTIPLE-CHOICE & MODELING QUESTIONS)
Answer Format
All correct answers, formulas, and financial outputs must appear in bold and cyan blue,
accompanied by concise rationales explaining the modeling step (e.g., "The revolver is used as a
plug to balance the balance sheet"), the calculation logic (e.g., "Exit Equity Value = Exit EBITDA ×
Exit Multiple − Net Debt"), the interconnection between statements (e.g., how depreciation flows
from the income statement to the cash flow statement and balance sheet), the interpretation of a
return metric, and why the alternative multiple-choice options contain formula errors, circular
reference mistakes, or misapplied LBO modeling conventions.
1. In an LBO model, what is the primary purpose of the Sources & Uses table?
A. To forecast future revenue growth
B. To calculate the company’s WACC
C. To show how the transaction is financed (Sources) and where the capital is spent (Uses)
, D. To determine the target’s historical EBITDA margin
Rationale: The Sources & Uses table reconciles total funding (e.g., equity, debt) with total expenditures
(e.g., equity purchase price, fees, refinancing existing debt). It ensures the deal “balances” and clarifies
the capital structure post-transaction.
2. Which of the following is typically included in the “Uses” section of an LBO model?
A. Proceeds from new term loan
B. Sponsor equity contribution
C. Refinancing of existing target debt
D. Interest income from cash
Rationale: “Uses” include the equity purchase price, transaction fees, and repayment of the target’s
existing debt. Sources include new debt and sponsor equity. Refinancing old debt is a use of proceeds,
not a source.
3. What is the correct formula for calculating Enterprise Value (EV) at acquisition in an LBO?
A. Equity Purchase Price + Cash
B. Equity Purchase Price − Net Debt
C. Equity Purchase Price + Net Debt
D. EBITDA × Entry Multiple + Cash
Rationale: EV = Equity Value + Net Debt (Debt − Cash). At acquisition, EV also equals EBITDA × Entry
Multiple. Option C correctly adds net debt to the equity purchase price to derive EV.
4. In purchase price allocation (PPA), how is goodwill calculated?
A. Total Assets − Total Liabilities
B. Fair Value of Identifiable Net Assets − Purchase Price
C. Purchase Price − Fair Value of Identifiable Net Assets
