Modeling

Question 1

Formula for DPO

Answer 1

• Average AP / COGS * Days in Period

Question 2

Formula for DSO

Answer 2

• Average AR / (Annual Sales or Credit Sales) * Days in Period

Question 3

Structure / Components of Basic LBO

Answer 3

• Assumptions
• Sources & Uses
• Income Statement
• Cash Flow Statement
• Debt Schedule
• Cap Table / Options
• Return Schedule

Question 4

Formula for Days Inventory Outstanding

Answer 4

• Average Inventory / COGS * Days in Period

Question 5

Goodwill Purchase Accounting Calculation (Stock Acquisition)

Answer 5

Equity Purchase Price
(-) NAV or Shareholders Equity 
(+) MnA or Advisory Fees
(+) Existing Goodwill
= Excess to Allocate
(-) Excess Allocated to Write up of Assets
(+) DTL Created from Asset Write Up
= New Goodwill

Question 6

AR with DSO

Answer 6

DSO / Days * Sales = AR

Question 7

AP with DPO

Answer 7

DPO / Days * COGS = AP

Question 8

Inventory with DIO

Answer 8

DIO / Days * COGS

Question 9

Key MOIC to IRR Conversions

Answer 9

• 5 Years: 1.5x-8.5%, 2.0x-15%, 2.5x-20%, 3.0x-24.5%, 3.5x-28.5%, 4.0x-32%

Question 10

Walk me through a DCF

Answer 10

1 - walk from EBIT to Unlevered Free Cash Flows
2 - Project out the UFCF over the 5 year period
3 - Project your terminal year and calculate your TY values
4 - Discount the UFCF using WACC (Discount Factor is (1/(1+WACC)^Discount Period)
5 - Sum the values to get TEV

Question 11

Formula for Revolver

Answer 11

-MIN(MAX(FCF, Beg Bal - Max Commit),Beg Bal)

Question 12

Formula for Implied Equity w/ Target IRR

Answer 12

Equity Value at Close (Sale) / (1+Target IRR)^(Years)