WALL STREET PREP – LEVERAGED BUYOUT (LBO) MODELING EXAM QUESTIONS AND COMPLETE SOLUTIONS

QUESTION 1 On December 31, 2016, JJB, a private equity fund, purchased Geozone, a company with $882.7 million in last twelve months (LTM) EBITDA and an 8.0x multiple. EBITDA will expand at an annual rate of 8% during the following S years. Geozone owed $50.0 million and had $20.0 million in cash at the time of the acquisition. Debt and cash balances remained steady throughout the next five years. What is the equity value at exit if the sale occurs on December 31, 2021 at an 8x multiple? 3,314. 7,031.6 7,061.6 10,345.8 10,375.8 QUESTION 2 Which of the tallowing would INCREASE cash available tor optional Revolver repayments? Decreases in Accounts Payables Increases in Mandatory Term Loan B Debt Repayments Increases in Accounts Receivables Increases in Capital Expenditures Increases in Depreciation and Amortization QUESTION 3 The next five questions use the data provided below. On December 31, 2016, Silver Lane Partners, a private equity fund, bought Baezmore Telecom (BT), a company with $882.7 million in last twelve months (LTM) EBITDA, for an enterprise value of 8.0 times. At the time of the acquisition, BT had noncontrolling interests valued at $30.0 million, debt of $S0.0m, equity investments at $8.0m, and cash of $20.0m. As part of the agreement included the acquisition of all noncontrolling interests (at market value) and the refinancing of all existing debt. To fund the buyout. Silver Lane was able to secure $250 million in debt financing at a 10.0% rate of interest (to be paid annually at each year end on the debt outstanding)