Forum Search: portfolio risk management
Quick cost of debt question
Hi, In the finance 101 vid, you mention that the cost of debt, in theory, is the incremental marginal borrowing rate - the more one borrows, the higher the risk and thus rate. But we must use the current yield to maturity as the next best answer because the marginal rate is impossible to predict.... Read More
Hi, In the finance 101 vid, you mention that the cost of debt, in theory, is the incremental marginal borrowing rate - the more one borrows, the higher the risk and thus rate. But we must use the current yield to maturity as the next best answer because the marginal rate is impossible to predict.... Read More
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
Sources and Uses Questions
Does Management Rollover Equity affect Sponsor IRRs at all? Why? Would the Sponsors IRR be lower, higher, or the same assuming there was rollover? In the Quick and dirty LBO model in the sources there was 10,520 of debt. This equates to 6.3x debt to ebitda. I know it is different for every industry... Read More
Does Management Rollover Equity affect Sponsor IRRs at all? Why? Would the Sponsors IRR be lower, higher, or the same assuming there was rollover? In the Quick and dirty LBO model in the sources there was 10,520 of debt. This equates to 6.3x debt to ebitda. I know it is different for every industry... 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
Cost of Equity and Debt
How does the cost of equity of the target affect an LBO or investment decision? This is a private company and I know that publicly traded entities with the same risk characteristics have a cost of equity of 8.5%. I am wondering if it affects anything other than the initial standalone valuation used ... Read More
How does the cost of equity of the target affect an LBO or investment decision? This is a private company and I know that publicly traded entities with the same risk characteristics have a cost of equity of 8.5%. I am wondering if it affects anything other than the initial standalone valuation used ... Read More
Re: startups
Valuing startup companies is like throwing darts at the sun. None of the usual valuation methodologies apply because no one knows what will happen and the high risk and probability of failure despite the huge potential reward. Even multiples is sort of silly since who do you pick as your benchmark?... Read More
Valuing startup companies is like throwing darts at the sun. None of the usual valuation methodologies apply because no one knows what will happen and the high risk and probability of failure despite the huge potential reward. Even multiples is sort of silly since who do you pick as your benchmark?... Read More
Published M&A and LBO Deal Information
Hi Guys, I am a graduate from Surrey University in England. Having recently completed all your core modules as preparation for an interview in London, I have some further prep to do. I have been advised to (1) read up on recent and past M&A and LBO transactions (more focus on LBOs) and (2) re... Read More
Hi Guys, I am a graduate from Surrey University in England. Having recently completed all your core modules as preparation for an interview in London, I have some further prep to do. I have been advised to (1) read up on recent and past M&A and LBO transactions (more focus on LBOs) and (2) re... Read More
Re: Published M&A and LBO Deal Information
1) Yes, you can go to sources like http://www.thedeal.com that also tracks transactions. Resources like NYTimes Deal Book as well. Or quick frankly, a google search for something like "recent LBO deals". We're sure s... Read More
1) Yes, you can go to sources like http://www.thedeal.com that also tracks transactions. Resources like NYTimes Deal Book as well. Or quick frankly, a google search for something like "recent LBO deals". We're sure s... Read More
Re: CFA certification
Super important for certain aspects of finance (research, portfolio and asset mgmt, etc) But not as relevant for IB or PE. CFA is very critical to demonstrating that at one point you knew something about all major aspects of finance. Despite the fact we know you forget everything after the exam, it... Read More
Super important for certain aspects of finance (research, portfolio and asset mgmt, etc) But not as relevant for IB or PE. CFA is very critical to demonstrating that at one point you knew something about all major aspects of finance. Despite the fact we know you forget everything after the exam, it... Read More
Hi there, here I have a couple of questions on this class: (1). I did not understand why we calculated EBIT as EBT + Net Interest Expense since in p.13 in our 10K they state clearly that the company considers the OPERATING PROFIT (EBIT), calculated as Gross Margin - SG&A, as a key measurement... Hi there, here I have a couple of questions on this class:
(1). I did not understand why we calculated EBIT as EBT + Net Interest Expense since in p.13 in our 10K they state clearly that the company considers the OPERATING PROFIT (EBIT), calculated as Gross Margin - SG&A, as a key measurement of its business operations. With a such statement, shouldn't we have calculated EBIT accordingly (GM-SG&A) to be consistent on how the company itself measures its profitability?
(2). We didn't adjust for Asset Impairment arguing that the 10K says it's an "on-going evaluation process". However, if we think about it, it is essentially an 'ongoing evaluation process" as a result of an accounting requirement to be so, and not a pure management decision to do such evaluations. Take the goodwill impairment, for example, that we generally want to adjust financials to exclude the impact of this impairment (that is also an ongoing revaluation requirement). So, why don't we do the same here with the asset impairment (and adjust its impact on IS) and be consistent w/ the goodwill impairment treatment?
Thanks a lot. Read More