LBO Modeling Exam | Wall Street Prep | Verified
Questions and Correct Answers | A+ Graded |
2025/2026 Edition
Section 1: Introduction
This document presents the official Leveraged Buyout (LBO) Modeling Exam from Wall
Street Prep (WSP), fully updated for the 2025/2026 edition, with verified questions and 100%
correct answers. It tests practical skills in building and interpreting LBO models, including
areas such as transaction structure, debt schedules, IRR calculations, cash flow modeling,
sources & uses, sensitivity analysis, and exit multiples. Designed for finance professionals,
private equity candidates, and investment banking trainees, this A+ graded guide is the
essential benchmark for WSP course mastery.
Section 2: Exam Questions and Answers
Format: Case-based and model-driven questions
Four answer choices per question (A–D) or input-driven solutions
Correct answer highlighted in green
Includes step-by-step logic behind IRR, MOIC, and balance sheet integration
1. What is the primary purpose of an LBO model?
A) To value a company using DCF
B) To assess the feasibility of a leveraged acquisition
C) To create a marketing plan
D) To calculate tax liabilities
B) To assess the feasibility of a leveraged acquisition
2. In an LBO, what does the "sources & uses" table represent?
A) Cash inflows and outflows over time
B) Funding sources and how funds are spent
C) Debt repayment schedule
D) Equity distribution to shareholders
B) Funding sources and how funds are spent
3. What is the formula for calculating IRR in an LBO?
A) =NPV(rate, cashflows)
B) =IRR(cashflows, [guess])
C) =XIRR(cashflows, dates, [guess])
D) =PV(rate, nper, pmt, [fv], [type])
B) =IRR(cashflows, [guess])
4. Which debt type is commonly used in the first lien in an LBO structure?
A) Mezzanine debt
B) Senior secured term loan
C) Subordinated debt
D) High-yield bonds
B) Senior secured term loan
5. What is the typical exit horizon for an LBO?
A) 1-3 years
B) 3-7 years
, C) 10-15 years
D) 20+ years
B) 3-7 years
6. In a sources & uses table, what is included under "uses"?
A) Equity contribution and debt financing
B) Purchase price and transaction fees
C) Interest payments and principal repayment
D) Dividend distributions
B) Purchase price and transaction fees
7. What does MOIC stand for in LBO analysis?
A) Multiple on Invested Capital
B) Margin of Interest Cost
C) Maximum Operating Income Calculation
D) Market Operating Investment Curve
A) Multiple on Invested Capital
8. Which factor most impacts IRR in an LBO model?
A) Exit multiple
B) Office rent expenses
C) Employee salaries
D) Marketing budget
A) Exit multiple
9. What is the purpose of a debt schedule in an LBO?
A) To track equity investments
B) To model debt repayment and interest
C) To calculate tax rates
D) To forecast revenue growth
B) To model debt repayment and interest
10. Which cash flow is used to service debt in an LBO?
A) Operating cash flow
B) Capital expenditures
C) Free cash flow to equity
D) Dividend cash flow
A) Operating cash flow
11. What is a common exit strategy in an LBO?
A) Initial public offering (IPO)
B) Bank loan refinancing
C) Employee stock ownership plan (ESOP)
D) Charitable donation
A) Initial public offering (IPO)
12. In an LBO model, how is the purchase price typically financed?
A) 100% equity
B) 50% equity, 50% debt
C) 30% equity, 70% debt
D) 10% equity, 90% debt
C) 30% equity, 70% debt
13. What is the formula for MOIC?
A) =Total Value / Invested Capital
B) =IRR / Initial Investment
C) =Net Income / Equity
Questions and Correct Answers | A+ Graded |
2025/2026 Edition
Section 1: Introduction
This document presents the official Leveraged Buyout (LBO) Modeling Exam from Wall
Street Prep (WSP), fully updated for the 2025/2026 edition, with verified questions and 100%
correct answers. It tests practical skills in building and interpreting LBO models, including
areas such as transaction structure, debt schedules, IRR calculations, cash flow modeling,
sources & uses, sensitivity analysis, and exit multiples. Designed for finance professionals,
private equity candidates, and investment banking trainees, this A+ graded guide is the
essential benchmark for WSP course mastery.
Section 2: Exam Questions and Answers
Format: Case-based and model-driven questions
Four answer choices per question (A–D) or input-driven solutions
Correct answer highlighted in green
Includes step-by-step logic behind IRR, MOIC, and balance sheet integration
1. What is the primary purpose of an LBO model?
A) To value a company using DCF
B) To assess the feasibility of a leveraged acquisition
C) To create a marketing plan
D) To calculate tax liabilities
B) To assess the feasibility of a leveraged acquisition
2. In an LBO, what does the "sources & uses" table represent?
A) Cash inflows and outflows over time
B) Funding sources and how funds are spent
C) Debt repayment schedule
D) Equity distribution to shareholders
B) Funding sources and how funds are spent
3. What is the formula for calculating IRR in an LBO?
A) =NPV(rate, cashflows)
B) =IRR(cashflows, [guess])
C) =XIRR(cashflows, dates, [guess])
D) =PV(rate, nper, pmt, [fv], [type])
B) =IRR(cashflows, [guess])
4. Which debt type is commonly used in the first lien in an LBO structure?
A) Mezzanine debt
B) Senior secured term loan
C) Subordinated debt
D) High-yield bonds
B) Senior secured term loan
5. What is the typical exit horizon for an LBO?
A) 1-3 years
B) 3-7 years
, C) 10-15 years
D) 20+ years
B) 3-7 years
6. In a sources & uses table, what is included under "uses"?
A) Equity contribution and debt financing
B) Purchase price and transaction fees
C) Interest payments and principal repayment
D) Dividend distributions
B) Purchase price and transaction fees
7. What does MOIC stand for in LBO analysis?
A) Multiple on Invested Capital
B) Margin of Interest Cost
C) Maximum Operating Income Calculation
D) Market Operating Investment Curve
A) Multiple on Invested Capital
8. Which factor most impacts IRR in an LBO model?
A) Exit multiple
B) Office rent expenses
C) Employee salaries
D) Marketing budget
A) Exit multiple
9. What is the purpose of a debt schedule in an LBO?
A) To track equity investments
B) To model debt repayment and interest
C) To calculate tax rates
D) To forecast revenue growth
B) To model debt repayment and interest
10. Which cash flow is used to service debt in an LBO?
A) Operating cash flow
B) Capital expenditures
C) Free cash flow to equity
D) Dividend cash flow
A) Operating cash flow
11. What is a common exit strategy in an LBO?
A) Initial public offering (IPO)
B) Bank loan refinancing
C) Employee stock ownership plan (ESOP)
D) Charitable donation
A) Initial public offering (IPO)
12. In an LBO model, how is the purchase price typically financed?
A) 100% equity
B) 50% equity, 50% debt
C) 30% equity, 70% debt
D) 10% equity, 90% debt
C) 30% equity, 70% debt
13. What is the formula for MOIC?
A) =Total Value / Invested Capital
B) =IRR / Initial Investment
C) =Net Income / Equity
