LBO Modeling Wall Street Prep Exam VERIFIED
WALL STREET PREP
Professional Financial Modeling Program
LBO Modeling
Wall Street Prep Exam
VERIFIED
Exam Type Comprehensive LBO Assessment
Total Questions 50 Questions
Duration 100 Minutes
Format Multiple Choice, Calculation & Analysis
Passing Score 75% (38/50 Questions)
Certificate Awarded upon successful completion
For personal study use only. Do not distribute.
VERIFIED EXAM MATERIAL | © Wall Street Prep | Page
,LBO Modeling Wall Street Prep Exam VERIFIED
EXAM INSTRUCTIONS
• This exam covers LBO modeling concepts tested on the Wall Street Prep certification.
• All 50 questions are multiple choice. Select the single best answer.
• Calculation questions may require scratch-paper work — show your reasoning.
• A financial calculator or spreadsheet software is permitted.
• All dollar figures are in millions ($ millions) unless stated otherwise.
• Passing score is 75% (38 correct out of 50).
Section Topic Qs
LBO Fundamentals &
Section 1 Q1–Q10
Structure
Sources & Uses /
Section 2 Q11–Q20
Capital Structure
LBO Returns & IRR
Section 3 Q21–Q30
Analysis
Debt Schedules &
Section 4 Q31–Q40
Cash Sweeps
Exit Analysis &
Section 5 Q41–Q50
Sensitivity
SECTION 1 — LBO Fundamentals & Structure
Question 1: JJB, a private equity firm, acquired Ganzone on December 31, 2016, a company
with last twelve months (LTM) EBITDA of $887.7 million at an 8.0x LTM EBITDA multiple.
EBITDA will grow by 8% annually for the next 5 years. Immediately prior to the acquisition,
Ganzone had debt of $500.0 million and cash of $210.0 million. Debt and cash balances
remained unchanged through the next 5 years. Assuming a sale on December 31, 2021 at an
8x multiple, what is the equity value at Exit?
A. $314.2
B. $7,031.6
C. $10,345.8
D. $10,375.8
Correct Answer: D — Entry EV = 8.0x × $887.7M = $7,101.6M. Entry Equity = EV – Net Debt
= $7,101.6 – ($500 – $210) = $6,811.6M. LTM EBITDA at exit (5 yrs × 8% CAGR): $887.7 × 1.08^5
= $1,304.5M. Exit EV = 8x × $1,304.5 = $10,435.8M. Exit Equity = $10,435.8 – $290 net debt ≈
$10,375.8M
VERIFIED EXAM MATERIAL | © Wall Street Prep | Page
, LBO Modeling Wall Street Prep Exam VERIFIED
Question 2: Which of the following would INCREASE cash available for optional Revolver
repayments?
A. Decreases in Accounts Payables
B. Increases in Mandatory Term Loan B Debt Repayments
C. Increases in Accounts Receivables
D. Increases in Capital Expenditures
E. Increases in Depreciation and Amortization
Correct Answer: E — D&A is a non-cash expense added back to net income in the cash-flow
waterfall. Higher D&A increases operating cash flow and thus cash available for optional debt
repayments.
Question 3: In a leveraged buyout, the PRIMARY purpose of using debt financing is to:
A. Reduce the company's tax burden through interest deductions
B. Amplify equity returns by minimizing equity invested relative to total deal value
C. Improve the target company's credit rating
D. Satisfy regulatory requirements for public company acquisitions
Correct Answer: B — The core LBO mechanic is leverage: using debt to finance a large
portion of the purchase price, so a smaller equity check captures the full enterprise value
appreciation — amplifying IRR.
Question 4: Which metric is MOST commonly used to size debt in an LBO transaction?
A. Net Income
B. Free Cash Flow to Equity
C. EBITDA
D. Revenue
Correct Answer: C — Leverage is expressed as a multiple of EBITDA (e.g., 5.0x–6.0x Total
Debt / EBITDA). EBITDA approximates operating cash available to service debt, making it the
standard sizing metric.
Question 5: A private equity firm acquires a company for an enterprise value of $2,000M using
60% debt. The entry EBITDA is $250M. What is the entry leverage ratio (Total Debt / EBITDA)?
A. 4.0x
B. 4.8x
C. 6.0x
D. 8.0x
Correct Answer: B — Total Debt = 60% × $2,000M = $1,200M. Leverage = $1,200M / $250M
= 4.8x.
VERIFIED EXAM MATERIAL | © Wall Street Prep | Page
WALL STREET PREP
Professional Financial Modeling Program
LBO Modeling
Wall Street Prep Exam
VERIFIED
Exam Type Comprehensive LBO Assessment
Total Questions 50 Questions
Duration 100 Minutes
Format Multiple Choice, Calculation & Analysis
Passing Score 75% (38/50 Questions)
Certificate Awarded upon successful completion
For personal study use only. Do not distribute.
VERIFIED EXAM MATERIAL | © Wall Street Prep | Page
,LBO Modeling Wall Street Prep Exam VERIFIED
EXAM INSTRUCTIONS
• This exam covers LBO modeling concepts tested on the Wall Street Prep certification.
• All 50 questions are multiple choice. Select the single best answer.
• Calculation questions may require scratch-paper work — show your reasoning.
• A financial calculator or spreadsheet software is permitted.
• All dollar figures are in millions ($ millions) unless stated otherwise.
• Passing score is 75% (38 correct out of 50).
Section Topic Qs
LBO Fundamentals &
Section 1 Q1–Q10
Structure
Sources & Uses /
Section 2 Q11–Q20
Capital Structure
LBO Returns & IRR
Section 3 Q21–Q30
Analysis
Debt Schedules &
Section 4 Q31–Q40
Cash Sweeps
Exit Analysis &
Section 5 Q41–Q50
Sensitivity
SECTION 1 — LBO Fundamentals & Structure
Question 1: JJB, a private equity firm, acquired Ganzone on December 31, 2016, a company
with last twelve months (LTM) EBITDA of $887.7 million at an 8.0x LTM EBITDA multiple.
EBITDA will grow by 8% annually for the next 5 years. Immediately prior to the acquisition,
Ganzone had debt of $500.0 million and cash of $210.0 million. Debt and cash balances
remained unchanged through the next 5 years. Assuming a sale on December 31, 2021 at an
8x multiple, what is the equity value at Exit?
A. $314.2
B. $7,031.6
C. $10,345.8
D. $10,375.8
Correct Answer: D — Entry EV = 8.0x × $887.7M = $7,101.6M. Entry Equity = EV – Net Debt
= $7,101.6 – ($500 – $210) = $6,811.6M. LTM EBITDA at exit (5 yrs × 8% CAGR): $887.7 × 1.08^5
= $1,304.5M. Exit EV = 8x × $1,304.5 = $10,435.8M. Exit Equity = $10,435.8 – $290 net debt ≈
$10,375.8M
VERIFIED EXAM MATERIAL | © Wall Street Prep | Page
, LBO Modeling Wall Street Prep Exam VERIFIED
Question 2: Which of the following would INCREASE cash available for optional Revolver
repayments?
A. Decreases in Accounts Payables
B. Increases in Mandatory Term Loan B Debt Repayments
C. Increases in Accounts Receivables
D. Increases in Capital Expenditures
E. Increases in Depreciation and Amortization
Correct Answer: E — D&A is a non-cash expense added back to net income in the cash-flow
waterfall. Higher D&A increases operating cash flow and thus cash available for optional debt
repayments.
Question 3: In a leveraged buyout, the PRIMARY purpose of using debt financing is to:
A. Reduce the company's tax burden through interest deductions
B. Amplify equity returns by minimizing equity invested relative to total deal value
C. Improve the target company's credit rating
D. Satisfy regulatory requirements for public company acquisitions
Correct Answer: B — The core LBO mechanic is leverage: using debt to finance a large
portion of the purchase price, so a smaller equity check captures the full enterprise value
appreciation — amplifying IRR.
Question 4: Which metric is MOST commonly used to size debt in an LBO transaction?
A. Net Income
B. Free Cash Flow to Equity
C. EBITDA
D. Revenue
Correct Answer: C — Leverage is expressed as a multiple of EBITDA (e.g., 5.0x–6.0x Total
Debt / EBITDA). EBITDA approximates operating cash available to service debt, making it the
standard sizing metric.
Question 5: A private equity firm acquires a company for an enterprise value of $2,000M using
60% debt. The entry EBITDA is $250M. What is the entry leverage ratio (Total Debt / EBITDA)?
A. 4.0x
B. 4.8x
C. 6.0x
D. 8.0x
Correct Answer: B — Total Debt = 60% × $2,000M = $1,200M. Leverage = $1,200M / $250M
= 4.8x.
VERIFIED EXAM MATERIAL | © Wall Street Prep | Page
