Forum Search: capital markets
RE: Complex Trading Comps Analysis: COST Inputs
1) You helped our argument for us - because this is subjective, you CANNOT introduce (well we'll try not to introduce) subjectivity. Who is to argue what direction the stock price will take? WMT's stock price was in a $45-$50 band for 8 years, so who's to say that suddenly COST or anyone's stock pri... Read More
1) You helped our argument for us - because this is subjective, you CANNOT introduce (well we'll try not to introduce) subjectivity. Who is to argue what direction the stock price will take? WMT's stock price was in a $45-$50 band for 8 years, so who's to say that suddenly COST or anyone's stock pri... Read More
RE: Accounting changes
First of all, Changes in Accounting Principles that are below Net Income or Income from Continuing Operations never get touched. Second, again, use judgement - will this occur again in the future? For instance, don't make adjustments for SBC - Stock Based Compensation b/c that is a new pronouncem... Read More
First of all, Changes in Accounting Principles that are below Net Income or Income from Continuing Operations never get touched. Second, again, use judgement - will this occur again in the future? For instance, don't make adjustments for SBC - Stock Based Compensation b/c that is a new pronouncem... Read More
RE: 10 Unanswered complex LBO questions
1) Why would new debt be labeled as next year's existing debt? It would also be labeled as such if it was short term. It would most likely be another completely new tranche of debt like the Sr Notes or something. Term Loan is a specific type of bank debt. 2) Correct, for credit ratings, you not o... Read More
1) Why would new debt be labeled as next year's existing debt? It would also be labeled as such if it was short term. It would most likely be another completely new tranche of debt like the Sr Notes or something. Term Loan is a specific type of bank debt. 2) Correct, for credit ratings, you not o... Read More
Quick & Dirty LBO
I have just done the online Quick & Dirty LBO and have some questions versus the Quick & Dirty we did with Hamiliton in class in September: - Shareholders equity: should be the equity we pay less transaction costs per online version. We did not do this in class but rather took the equity pa... Read More
I have just done the online Quick & Dirty LBO and have some questions versus the Quick & Dirty we did with Hamiliton in class in September: - Shareholders equity: should be the equity we pay less transaction costs per online version. We did not do this in class but rather took the equity pa... Read More
Re: Quick & Dirty LBO
1) When you do the Complex LBO, you see that we sensitize depending on transaction structure (i.e. recap vs purchase accounting). In Recap accounting, trx costs are expensed and in Purchase accounting, trx costs are capitalized and increase GW. However, in 2009, trx costs are expensed regardless. So... Read More
1) When you do the Complex LBO, you see that we sensitize depending on transaction structure (i.e. recap vs purchase accounting). In Recap accounting, trx costs are expensed and in Purchase accounting, trx costs are capitalized and increase GW. However, in 2009, trx costs are expensed regardless. So... Read More
IRR decline
In the quick and dirty LBO, the IRRs begin to decline after a certain point…. The instructors explaination is “ you growth rates, your capital, your revenue must continue growing at the same rate as your IRR for the IRR to continue to grow”… Does this mean your Revenue must grow at 22.5% ann... Read More
In the quick and dirty LBO, the IRRs begin to decline after a certain point…. The instructors explaination is “ you growth rates, your capital, your revenue must continue growing at the same rate as your IRR for the IRR to continue to grow”… Does this mean your Revenue must grow at 22.5% ann... Read More
Re: Implied P/E of debt
Ratios and multiples are simply inverses of each other. When discounting $100 by 10% over one year, one normally does $100/1.1 = $90.909091 However, old school finance teaches you to use PV factors, or $100 x 0.909091 = same result. The PV factor is derived by taking 1/1.1 which is the same mathemat... Read More
Ratios and multiples are simply inverses of each other. When discounting $100 by 10% over one year, one normally does $100/1.1 = $90.909091 However, old school finance teaches you to use PV factors, or $100 x 0.909091 = same result. The PV factor is derived by taking 1/1.1 which is the same mathemat... Read More
Re: Sources and Uses Questions
Usually mgmt rollover or other rollover equity does not affect sponsor IRR since everything is the same proportion. The capital structure of an LBO company post-deal various but rules of thumb are: Bank Debt: 25%-50% Bonds: 25%-50% Equity: 15%-40% Bank Debt includes: revolver, term loans, securit... Read More
Usually mgmt rollover or other rollover equity does not affect sponsor IRR since everything is the same proportion. The capital structure of an LBO company post-deal various but rules of thumb are: Bank Debt: 25%-50% Bonds: 25%-50% Equity: 15%-40% Bank Debt includes: revolver, term loans, securit... Read More
Re: Cost of Equity and Debt
Take a look at our free Share Repurchase video class at www.wstselfstudy.com (FREE TRIAL link). That summarizes opportunity cost of capital changes. In the context of an LBO, the cost of equity becomes the private equity... Read More
Take a look at our free Share Repurchase video class at www.wstselfstudy.com (FREE TRIAL link). That summarizes opportunity cost of capital changes. In the context of an LBO, the cost of equity becomes the private equity... Read More
1) We use marginal tax rate b/c any additional new income is taxed at that (usually) higher rate rather than effective rate. If there is a progressive tax system in place or other tax credits that reduce (or increase) the tax rate, you don't want that distortion in there. 2) It depends on what co... 1) We use marginal tax rate b/c any additional new income is taxed at that (usually) higher rate rather than effective rate. If there is a progressive tax system in place or other tax credits that reduce (or increase) the tax rate, you don't want that distortion in there.
2) It depends on what context your Total Debt is calculated as. For WACC, definitely include WACC and yes of course Preferred is definitely leverage b/c it is a source of capital other than equity. For credit analysis, there is partial equity treatment of preferred depending on the specific terms.
3) When Depreciation is the same as IS/CF, it doesn't matter. However, keep in mind, depreciation can be classified as either COGS or SG&A and to be safe, use the actual cash number (from CF) not from IS as the IS reflects accounting not true cash figure.
4) You have discretion to reclassfiy as you please. In our Basic Financial Modeling online video course modeling out HRH, we reclassified something in Revenue to below EBIT. As long as you are consistent and as you pointed out, make sure your ratios are correct. Problem is, each company (or rather, sector) is different. Read More