Trading Comps Modeling Exam Wall Street Prep / Wall Street
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On December 30, 2013:
• Company Y trades at $10 per share
• Enterprise Value / EBITDA multiple of 5.0x
• Leverage ratio of 0.6x (Net debt/EBITDA)
• 2013 EBITDA = $2.0 billion
• Assume no cash on company Y's balance sheet On December
31, 2013:
• Company Y undergoes an LBO and is recapitalized
• The company's new leverage ratio becomes 5.0x
• Financial sponsor exit is planned for Year 5. Assume that the
EV/ EBITDA multiple at exit year is the same as the current
multiple.
• Required rate of return is 25%
• Exit year EBITDA projected to be $3.0 billion
• The company's year-end leverage ratio is 1.6x
What is the initial Equity Value? - ANSWER-8.8 billion
,On December 30, 2013:
• Company Y trades at $10 per share
• Enterprise Value / EBITDA multiple of 5.0x
• Leverage ratio of 0.6x (Net debt/EBITDA)
• 2013 EBITDA = $2.0 billion
• Assume no cash on company Y's balance sheet On December
31, 2013:
• Company Y undergoes an LBO and is recapitalized
• The company's new leverage ratio becomes 5.0x
• Financial sponsor exit is planned for Year 5. Assume that the
EV/ EBITDA multiple at exit year is the same as the current
multiple.
• Required rate of return is 25%
• Exit year EBITDA projected to be $3.0 billion
• The company's year-end leverage ratio is 1.6x
How much debt is paid down by the exit year (since the LBO
announcement)? - ANSWER-5.2 billion
On December 30, 2013:
• Company Y trades at $10 per share
• Enterprise Value / EBITDA multiple of 5.0x
• Leverage ratio of 0.6x (Net debt/EBITDA)
• 2013 EBITDA = $2.0 billion
, • Assume no cash on company Y's balance sheet On December
31, 2013:
• Company Y undergoes an LBO and is recapitalized
• The company's new leverage ratio becomes 5.0x
• Financial sponsor exit is planned for Year 5. Assume that the
EV/ EBITDA multiple at exit year is the same as the current
multiple.
• Required rate of return is 25%
• Exit year EBITDA projected to be $3.0 billion
• The company's year-end leverage ratio is 1.6x
What is the initial equity necessary to achieve the rate of return
required by the financial sponsors? - ANSWER-3.34 billion
Non-equity claims that should be deducted from Enterprise
Value to find Equity
Value include all of the following EXCEPT: - ANSWER-
Minority interest,
preferred stock, capitalized
leases
LTM (Last Twelve Months) is calculated as follows - ANSWER-
Latest completed fiscal year results + Latest reported stub
period results - Same stub period results from one year ago
Prep Premium Exam 2025\2026 Actual Complete Real Exam
Questions And Correct Answers |100% Verified solutions |
Already Graded A+ | Newest Exam | Just Released!!
On December 30, 2013:
• Company Y trades at $10 per share
• Enterprise Value / EBITDA multiple of 5.0x
• Leverage ratio of 0.6x (Net debt/EBITDA)
• 2013 EBITDA = $2.0 billion
• Assume no cash on company Y's balance sheet On December
31, 2013:
• Company Y undergoes an LBO and is recapitalized
• The company's new leverage ratio becomes 5.0x
• Financial sponsor exit is planned for Year 5. Assume that the
EV/ EBITDA multiple at exit year is the same as the current
multiple.
• Required rate of return is 25%
• Exit year EBITDA projected to be $3.0 billion
• The company's year-end leverage ratio is 1.6x
What is the initial Equity Value? - ANSWER-8.8 billion
,On December 30, 2013:
• Company Y trades at $10 per share
• Enterprise Value / EBITDA multiple of 5.0x
• Leverage ratio of 0.6x (Net debt/EBITDA)
• 2013 EBITDA = $2.0 billion
• Assume no cash on company Y's balance sheet On December
31, 2013:
• Company Y undergoes an LBO and is recapitalized
• The company's new leverage ratio becomes 5.0x
• Financial sponsor exit is planned for Year 5. Assume that the
EV/ EBITDA multiple at exit year is the same as the current
multiple.
• Required rate of return is 25%
• Exit year EBITDA projected to be $3.0 billion
• The company's year-end leverage ratio is 1.6x
How much debt is paid down by the exit year (since the LBO
announcement)? - ANSWER-5.2 billion
On December 30, 2013:
• Company Y trades at $10 per share
• Enterprise Value / EBITDA multiple of 5.0x
• Leverage ratio of 0.6x (Net debt/EBITDA)
• 2013 EBITDA = $2.0 billion
, • Assume no cash on company Y's balance sheet On December
31, 2013:
• Company Y undergoes an LBO and is recapitalized
• The company's new leverage ratio becomes 5.0x
• Financial sponsor exit is planned for Year 5. Assume that the
EV/ EBITDA multiple at exit year is the same as the current
multiple.
• Required rate of return is 25%
• Exit year EBITDA projected to be $3.0 billion
• The company's year-end leverage ratio is 1.6x
What is the initial equity necessary to achieve the rate of return
required by the financial sponsors? - ANSWER-3.34 billion
Non-equity claims that should be deducted from Enterprise
Value to find Equity
Value include all of the following EXCEPT: - ANSWER-
Minority interest,
preferred stock, capitalized
leases
LTM (Last Twelve Months) is calculated as follows - ANSWER-
Latest completed fiscal year results + Latest reported stub
period results - Same stub period results from one year ago
