Wall Street Prep LBO Modeling –
Comprehensive Exam Solutions Ultimate Guide for
Mastering Private Equity Modeling
Prepared for Wall Street Prep Candidates, 2025
Curated by Financial Modeling Experts
,Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2 LBO Modeling Fundamentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Question 1: Core Concept of an LBO . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Question 2: Strategic Goals of an LBO . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Question 3: Role of Sources and Uses Table . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Question 4: Understanding IRR in LBOs . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Question 5: MOIC as a Performance Metric . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Question 6: Leverage Metrics in LBOs . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Question 7: Cash-Free Debt-Free Valuation . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Question 8: Rollover Equity Mechanics . . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 Question 9: Purchase Price Allocation Process . . . . . . . . . . . . . . . . . . . . . 6
2.10 Question 10: Role of Goodwill in LBOs . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 Question 11: Debt Instruments in LBOs . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Question 12: Revolver’s Role in Liquidity . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Question 13: Capitalized Financing Fees . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Question 14: Importance of EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.15 Question 15: Entry Multiple Dynamics . . . . . . . . . . . . . . . . . . . . . . . . 7
2.16 Question 16: Exit Multiple Assumptions . . . . . . . . . . . . . . . . . . . . . . . 7
2.17 Question 17: Free Cash Flow Calculation . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 Question 18: Debt Amortization Schedules . . . . . . . . . . . . . . . . . . . . . . 7
2.19 Question 19: Interest Expense Modeling . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 Question 20: Managing Model Circularity . . . . . . . . . . . . . . . . . . . . . . 8
2.21 Question 21: Minimum Cash Requirements . . . . . . . . . . . . . . . . . . . . . . 8
2.22 Question 22: Dividend Recapitalization Strategy . . . . . . . . . . . . . . . . . . . 8
2.23 Question 23: Management Buyout Structure . . . . . . . . . . . . . . . . . . . . . 8
2.24 Question 24: Applying the Rule of 72 . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 Question 25: Ability to Pay Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 Question 26: Purchase Premium Implications . . . . . . . . . . . . . . . . . . . . . 9
2.27 Question 27: Role of Debt Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.28 Question 28: Equity Contribution Standards . . . . . . . . . . . . . . . . . . . . . 9
2.29 Question 29: LBO Exit Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.30 Question 30: Sensitivity Analysis Purpose . . . . . . . . . . . . . . . . . . . . . . . 9
3 LBO Modeling Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Basic LBO Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Question 31: Calculating Enterprise Value . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Question 32: Determining Equity Value . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Question 33: Structuring Sources of Funds . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Question 34: Allocating Uses of Funds . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Question 35: Debt-to-EBITDA Analysis . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Question 36: Modeling Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Question 37: Free Cash Flow Computation . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Question 38: Optional Debt Repayment . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10 Question 39: MOIC Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.11 Question 40: IRR Approximation . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.12 Question 41: Goodwill Determination . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.13 Question 42: Depreciation from Asset Write-Up . . . . . . . . . . . . . . . . . . . 12
1
,Wall Street Prep LBO Modeling – Comprehensive Exam Solutions July 6, 2025
3.14 Question 43: Revolver Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.15 Question 44: Net Debt at Exit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.16 Question 45: Exit Enterprise Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.17 Question 46: Exit Equity Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.18 Question 47: Financing Fees Amortization . . . . . . . . . . . . . . . . . . . . . . 13
3.19 Question 48: EBITDA Margin Analysis . . . . . . . . . . . . . . . . . . . . . . . . 13
3.20 Question 49: Debt Service Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . 13
3.21 Question 50: Cash Flow Sweep Mechanism . . . . . . . . . . . . . . . . . . . . . . 13
3.22 Standard LBO Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.23 Question 51: JoeCo LBO Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.24 Question 52: JoeCo Equity Financing . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.25 Question 53: JoeCo Debt Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.26 Question 54: JoeCo Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.27 Question 55: JoeCo EBITDA Projection . . . . . . . . . . . . . . . . . . . . . . . . 14
3.28 Question 56: JoeCo Year 3 FCF . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.29 Question 57: JoeCo Debt Reduction . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.30 Question 58: JoeCo Exit Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.31 Question 59: JoeCo Exit Equity Value . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.32 Question 60: JoeCo MOIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.33 Advanced LBO Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.34 Question 61: TeaCo Take-Private Valuation . . . . . . . . . . . . . . . . . . . . . . 16
3.35 Question 62: TeaCo Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.36 Question 63: TeaCo Debt Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.37 Question 64: TeaCo Preferred Equity Growth . . . . . . . . . . . . . . . . . . . . . 16
3.38 Question 65: TeaCo Monitoring Fees . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.39 Question 66: Intangible Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . 16
3.40 Question 67: TeaCo Leverage Constraint . . . . . . . . . . . . . . . . . . . . . . . 17
3.41 Question 68: TeaCo Revenue Growth . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.42 Question 69: TeaCo EBITDA Projection . . . . . . . . . . . . . . . . . . . . . . . 17
3.43 Question 70: TeaCo IRR Calculation . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.44 Advanced Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.45 Question 71: Deferred Tax Liability Impact . . . . . . . . . . . . . . . . . . . . . . 17
3.46 Question 72: Option Pool Dilution Effect . . . . . . . . . . . . . . . . . . . . . . . 18
3.47 Question 73: Dividend Recap Impact . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.48 Question 74: Cash Flow Waterfall . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.49 Question 75: Working Capital Adjustment . . . . . . . . . . . . . . . . . . . . . . 18
3.50 Question 76: Original Issue Discount . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.51 Question 77: Tax Shield Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.52 Question 78: LBO Break-Even Analysis . . . . . . . . . . . . . . . . . . . . . . . . 19
3.53 Question 79: Sensitivity Table Creation . . . . . . . . . . . . . . . . . . . . . . . . 19
3.54 Question 80: PIK Interest Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.55 Question 81: Management Earn-Out Structure . . . . . . . . . . . . . . . . . . . . 19
3.56 Question 82: Add-On Acquisition Value . . . . . . . . . . . . . . . . . . . . . . . 20
3.57 Question 83: Debt Repayment Priority . . . . . . . . . . . . . . . . . . . . . . . . 20
3.58 Question 84: Exit Share Price Calculation . . . . . . . . . . . . . . . . . . . . . . . 20
3.59 Question 85: Resolving Model Circularity . . . . . . . . . . . . . . . . . . . . . . . 20
3.60 Question 86: Minimum Equity Requirements . . . . . . . . . . . . . . . . . . . . 20
3.61 Question 87: Cash Flow from Operations . . . . . . . . . . . . . . . . . . . . . . . 20
3.62 Question 88: Capex Impact on FCF . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.63 Question 89: Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 21
Page 2 of 30
, Wall Street Prep LBO Modeling – Comprehensive Exam Solutions July 6, 2025
3.64 Question 90: Exit Multiple Sensitivity . . . . . . . . . . . . . . . . . . . . . . . . . 21
4 Case-Based Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 Question 91: JoeCo Acquisition Structure . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Question 92: JoeCo Debt Repayment . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Question 93: JoeCo Exit Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Question 94: JoeCo MOIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Question 95: TeaCo Take-Private Deal . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Question 96: TeaCo Preferred Equity . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.7 Question 97: TeaCo Leverage Compliance . . . . . . . . . . . . . . . . . . . . . . 23
4.8 Question 98: JoeCo Goodwill Calculation . . . . . . . . . . . . . . . . . . . . . . 23
4.9 Question 99: JoeCo IRR Estimation . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.10 Question 100: TeaCo Revenue Forecast . . . . . . . . . . . . . . . . . . . . . . . . 24
4.11 Question 101: JoeCo Debt Service Coverage . . . . . . . . . . . . . . . . . . . . . . 24
4.12 Question 102: TeaCo Option Pool Dilution . . . . . . . . . . . . . . . . . . . . . . 24
4.13 Question 103: JoeCo Tax Shield . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.14 Question 104: TeaCo Dividend Recap . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.15 Question 105: JoeCo FCF Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.16 Question 106: TeaCo Exit Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.17 Question 107: JoeCo Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . 26
4.18 Question 108: TeaCo OID Calculation . . . . . . . . . . . . . . . . . . . . . . . . 26
4.19 Question 109: JoeCo Debt Covenant . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.20 Question 110: TeaCo Share Price Decline . . . . . . . . . . . . . . . . . . . . . . . 27
4.21 Question 111: JoeCo Revolver Draw . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.22 Question 112: TeaCo Monitoring Fee Impact . . . . . . . . . . . . . . . . . . . . . 27
4.23 Question 113: JoeCo Tax Rate Change . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.24 Question 114: TeaCo Exit Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.25 Question 115: JoeCo ATP Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.26 Question 116: TeaCo Debt Paydown . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.27 Question 117: JoeCo Intangible Amortization . . . . . . . . . . . . . . . . . . . . . 29
4.28 Question 118: TeaCo Share Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.29 Question 119: JoeCo Cash Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.30 Question 120: TeaCo IRR Enhancement . . . . . . . . . . . . . . . . . . . . . . . 30
5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Page 3 of 30
Comprehensive Exam Solutions Ultimate Guide for
Mastering Private Equity Modeling
Prepared for Wall Street Prep Candidates, 2025
Curated by Financial Modeling Experts
,Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2 LBO Modeling Fundamentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Question 1: Core Concept of an LBO . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Question 2: Strategic Goals of an LBO . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Question 3: Role of Sources and Uses Table . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Question 4: Understanding IRR in LBOs . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Question 5: MOIC as a Performance Metric . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Question 6: Leverage Metrics in LBOs . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 Question 7: Cash-Free Debt-Free Valuation . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Question 8: Rollover Equity Mechanics . . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 Question 9: Purchase Price Allocation Process . . . . . . . . . . . . . . . . . . . . . 6
2.10 Question 10: Role of Goodwill in LBOs . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 Question 11: Debt Instruments in LBOs . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Question 12: Revolver’s Role in Liquidity . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Question 13: Capitalized Financing Fees . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Question 14: Importance of EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.15 Question 15: Entry Multiple Dynamics . . . . . . . . . . . . . . . . . . . . . . . . 7
2.16 Question 16: Exit Multiple Assumptions . . . . . . . . . . . . . . . . . . . . . . . 7
2.17 Question 17: Free Cash Flow Calculation . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 Question 18: Debt Amortization Schedules . . . . . . . . . . . . . . . . . . . . . . 7
2.19 Question 19: Interest Expense Modeling . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 Question 20: Managing Model Circularity . . . . . . . . . . . . . . . . . . . . . . 8
2.21 Question 21: Minimum Cash Requirements . . . . . . . . . . . . . . . . . . . . . . 8
2.22 Question 22: Dividend Recapitalization Strategy . . . . . . . . . . . . . . . . . . . 8
2.23 Question 23: Management Buyout Structure . . . . . . . . . . . . . . . . . . . . . 8
2.24 Question 24: Applying the Rule of 72 . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 Question 25: Ability to Pay Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 Question 26: Purchase Premium Implications . . . . . . . . . . . . . . . . . . . . . 9
2.27 Question 27: Role of Debt Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.28 Question 28: Equity Contribution Standards . . . . . . . . . . . . . . . . . . . . . 9
2.29 Question 29: LBO Exit Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.30 Question 30: Sensitivity Analysis Purpose . . . . . . . . . . . . . . . . . . . . . . . 9
3 LBO Modeling Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Basic LBO Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Question 31: Calculating Enterprise Value . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Question 32: Determining Equity Value . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Question 33: Structuring Sources of Funds . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Question 34: Allocating Uses of Funds . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Question 35: Debt-to-EBITDA Analysis . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Question 36: Modeling Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Question 37: Free Cash Flow Computation . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Question 38: Optional Debt Repayment . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10 Question 39: MOIC Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.11 Question 40: IRR Approximation . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.12 Question 41: Goodwill Determination . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.13 Question 42: Depreciation from Asset Write-Up . . . . . . . . . . . . . . . . . . . 12
1
,Wall Street Prep LBO Modeling – Comprehensive Exam Solutions July 6, 2025
3.14 Question 43: Revolver Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.15 Question 44: Net Debt at Exit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.16 Question 45: Exit Enterprise Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.17 Question 46: Exit Equity Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.18 Question 47: Financing Fees Amortization . . . . . . . . . . . . . . . . . . . . . . 13
3.19 Question 48: EBITDA Margin Analysis . . . . . . . . . . . . . . . . . . . . . . . . 13
3.20 Question 49: Debt Service Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . 13
3.21 Question 50: Cash Flow Sweep Mechanism . . . . . . . . . . . . . . . . . . . . . . 13
3.22 Standard LBO Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.23 Question 51: JoeCo LBO Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.24 Question 52: JoeCo Equity Financing . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.25 Question 53: JoeCo Debt Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.26 Question 54: JoeCo Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.27 Question 55: JoeCo EBITDA Projection . . . . . . . . . . . . . . . . . . . . . . . . 14
3.28 Question 56: JoeCo Year 3 FCF . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.29 Question 57: JoeCo Debt Reduction . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.30 Question 58: JoeCo Exit Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.31 Question 59: JoeCo Exit Equity Value . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.32 Question 60: JoeCo MOIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.33 Advanced LBO Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.34 Question 61: TeaCo Take-Private Valuation . . . . . . . . . . . . . . . . . . . . . . 16
3.35 Question 62: TeaCo Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.36 Question 63: TeaCo Debt Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.37 Question 64: TeaCo Preferred Equity Growth . . . . . . . . . . . . . . . . . . . . . 16
3.38 Question 65: TeaCo Monitoring Fees . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.39 Question 66: Intangible Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . 16
3.40 Question 67: TeaCo Leverage Constraint . . . . . . . . . . . . . . . . . . . . . . . 17
3.41 Question 68: TeaCo Revenue Growth . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.42 Question 69: TeaCo EBITDA Projection . . . . . . . . . . . . . . . . . . . . . . . 17
3.43 Question 70: TeaCo IRR Calculation . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.44 Advanced Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.45 Question 71: Deferred Tax Liability Impact . . . . . . . . . . . . . . . . . . . . . . 17
3.46 Question 72: Option Pool Dilution Effect . . . . . . . . . . . . . . . . . . . . . . . 18
3.47 Question 73: Dividend Recap Impact . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.48 Question 74: Cash Flow Waterfall . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.49 Question 75: Working Capital Adjustment . . . . . . . . . . . . . . . . . . . . . . 18
3.50 Question 76: Original Issue Discount . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.51 Question 77: Tax Shield Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.52 Question 78: LBO Break-Even Analysis . . . . . . . . . . . . . . . . . . . . . . . . 19
3.53 Question 79: Sensitivity Table Creation . . . . . . . . . . . . . . . . . . . . . . . . 19
3.54 Question 80: PIK Interest Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.55 Question 81: Management Earn-Out Structure . . . . . . . . . . . . . . . . . . . . 19
3.56 Question 82: Add-On Acquisition Value . . . . . . . . . . . . . . . . . . . . . . . 20
3.57 Question 83: Debt Repayment Priority . . . . . . . . . . . . . . . . . . . . . . . . 20
3.58 Question 84: Exit Share Price Calculation . . . . . . . . . . . . . . . . . . . . . . . 20
3.59 Question 85: Resolving Model Circularity . . . . . . . . . . . . . . . . . . . . . . . 20
3.60 Question 86: Minimum Equity Requirements . . . . . . . . . . . . . . . . . . . . 20
3.61 Question 87: Cash Flow from Operations . . . . . . . . . . . . . . . . . . . . . . . 20
3.62 Question 88: Capex Impact on FCF . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.63 Question 89: Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 21
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, Wall Street Prep LBO Modeling – Comprehensive Exam Solutions July 6, 2025
3.64 Question 90: Exit Multiple Sensitivity . . . . . . . . . . . . . . . . . . . . . . . . . 21
4 Case-Based Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 Question 91: JoeCo Acquisition Structure . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Question 92: JoeCo Debt Repayment . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Question 93: JoeCo Exit Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Question 94: JoeCo MOIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Question 95: TeaCo Take-Private Deal . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Question 96: TeaCo Preferred Equity . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.7 Question 97: TeaCo Leverage Compliance . . . . . . . . . . . . . . . . . . . . . . 23
4.8 Question 98: JoeCo Goodwill Calculation . . . . . . . . . . . . . . . . . . . . . . 23
4.9 Question 99: JoeCo IRR Estimation . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.10 Question 100: TeaCo Revenue Forecast . . . . . . . . . . . . . . . . . . . . . . . . 24
4.11 Question 101: JoeCo Debt Service Coverage . . . . . . . . . . . . . . . . . . . . . . 24
4.12 Question 102: TeaCo Option Pool Dilution . . . . . . . . . . . . . . . . . . . . . . 24
4.13 Question 103: JoeCo Tax Shield . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.14 Question 104: TeaCo Dividend Recap . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.15 Question 105: JoeCo FCF Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.16 Question 106: TeaCo Exit Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.17 Question 107: JoeCo Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . 26
4.18 Question 108: TeaCo OID Calculation . . . . . . . . . . . . . . . . . . . . . . . . 26
4.19 Question 109: JoeCo Debt Covenant . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.20 Question 110: TeaCo Share Price Decline . . . . . . . . . . . . . . . . . . . . . . . 27
4.21 Question 111: JoeCo Revolver Draw . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.22 Question 112: TeaCo Monitoring Fee Impact . . . . . . . . . . . . . . . . . . . . . 27
4.23 Question 113: JoeCo Tax Rate Change . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.24 Question 114: TeaCo Exit Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.25 Question 115: JoeCo ATP Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.26 Question 116: TeaCo Debt Paydown . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.27 Question 117: JoeCo Intangible Amortization . . . . . . . . . . . . . . . . . . . . . 29
4.28 Question 118: TeaCo Share Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.29 Question 119: JoeCo Cash Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.30 Question 120: TeaCo IRR Enhancement . . . . . . . . . . . . . . . . . . . . . . . 30
5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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