Complex Trading Comps Analysis: Fair Value of Debt
Is it not more appropriate to use the fair Value of Debt (given in footnote 5 in F-15) versus the Book Value of Debt less Capital Leases Obligations as shown in the Video?

Thanks.

RE: Complex Trading Comps Analysis: Convertibles of COSTCO
1) Per the instruction in the video, it clearly stipulates that the key question in the costco converts rests on the timing - how long away is the maturity of the converts? if it matures tomorrow, the holder wouldn't convert b/c they can get more by simply holding to maturity and receiving par value... 1) Per the instruction in the video, it clearly stipulates that the key question in the costco converts rests on the timing - how long away is the maturity of the converts? if it matures tomorrow, the holder wouldn't convert b/c they can get more by simply holding to maturity and receiving par value. as financial analysts in the generic sense, one cannot introduce subjectivity as to say when is "far away enough" that a rationale investor would convert.

Again, to re-iterate our point, you mentioned PV of converts vs equivalent number of costco common shares - true statement, however, what costco shares suddenly dropped the next day? then it is suddenly out of the money and one wouldn't convert; thus, the timing of WHEN the PV is as of (in this case, years later) is critical - can one be absoultely sure that the price would go up in five years? ten years? most people would say yes, and we would disagree - case in point is WMT (wal-mart), the stock price has been stagnate and sideways for the past 5-7 years.

Thus, it is our opinion that it is NOT guaranteed that a rationale investor would necessarily convert given the specific information supplied for Costco at that given time.

Finally, pls note that the CFA is a great credential to have, but is still based on the textbook and not applied in real life.

2) Normally, per our instructions in the video, one would back out capital leases from the debt; however, because Costco's 10Q did not supply a full debt footnote in which we could have extracted such capital leases figures, we cannot just "make it up". One could argue to get it from Costco's 10K which might approximate the capital leases figure from 6 months prior (or 3 or 9 months prior depending on which 10Q), however, it is a worse sin to mix and match numbers from different time periods. Read More

RE: Complex Trading Comps Analysis: Weighs question
Thank you fro the quick reply but this is not what i was looking for. In the wacc calculation of WMart in cells H21:H24 you have hard inputed some numbers. In cell K21 you have a D/E ratio of 20% which is derived from the division of cells H21/H23. My question id the following: If the target c... Thank you fro the quick reply but this is not what i was looking for.

In the wacc calculation of WMart in cells H21:H24 you have hard inputed some numbers. In cell K21 you have a D/E ratio of 20% which is derived from the division of cells H21/H23. My question id the following:

If the target capital structure is D/E 20% how did you cmae up with the D/Cap and E/Cap in cells I 21 and I23 (16.7% and 83.3% respectively). Those figures are the result of the calculations wiht the use of the hard input figures i mentioned before. How did you came up with those hard inpout figures of 20(cell H21) 100(cell H23) and 120(cell H24)? Read More

RE: Quick & Dirty Basic LBO Model: Modeling Private Cos
The ramifications for a private company vs a public company are very similar - the major difference is that there is no EPS and Shares Outstanding. Thus, to "fudge it", you could assume that there is one Share Outstanding or, better yet, to be more precise, you would use Net Income => so instead ... The ramifications for a private company vs a public company are very similar - the major difference is that there is no EPS and Shares Outstanding. Thus, to "fudge it", you could assume that there is one Share Outstanding or, better yet, to be more precise, you would use Net Income => so instead of P/E, you would use Equity Value / Net Income per the courses.

In addition, for an LBO of a private company or a subsidiary (treated the same), the biggest change would be to drive the value of the offer price to be based on TEV/EBITDA as opposed to percent premium over current stock price (which doesn't exist). Everything else stays the same => you would still have TEV and Equity Value, just not Stock Price. Thus, there is no concept of "number of shares" or "nominal value"; you simply use TEV as the starting point and work the opposite direction on the capital structure.

For a large corporation wishing to divest a business unit with no legal entity, the parent company would have to first create a legal entity or structure it as an asset sale. There is never "no equity" - there is always a cost basis somewhere (both GAAP equivalent of Shareholders' Equity and tax basis for tax treatment). Read More

Very quick question
I know this isn't your specialty, but what major database do the majority of the banks use for Transactions Comps? ie. CapitalIq, Thomson SDC, etc? If a company were to subscribe to one what would you choose?