Posts by: WST Expert 1| Wall St. Training

Re: Tax rate in WACC
Generrally, for a US-based company with mostly US-domiciled income, you can assume 35-40% marginal rate. Go to the tax footnote to see a breakdown of tax rates and you can confirm this.

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by WST Expert 1.

added 11 years ago

RE: Convert an annual model into a quarterly tracking model
If you are actively tracking an industry as a research analyst, it is absolutely critical to maintain a "tracking model" in which you update quarterly results. your model must be flexible enough to handle the periodic updates from the company. regardless of the cyclicality of the business (which in ... If you are actively tracking an industry as a research analyst, it is absolutely critical to maintain a "tracking model" in which you update quarterly results. your model must be flexible enough to handle the periodic updates from the company. regardless of the cyclicality of the business (which in the retail space, is obviously cyclical), you need a quarterly model.

To expand the projection model from an annual model to a quarterly model, it really isn't difficult:
- increase the number of periods on the right by selecting the last full year and Ctrl+R to however many additional periods you want
- change the labels from annual to Q1, Q2, Q3, Q4 and add a new row on top to indicate the Years
- decide if you want to put Full Year right after Q4 or summarized to the right of your model, really depends on your preference. obviously Full Year will be sum of the applicable four quarters
- instead of sequential Year-over-Year growth rates, use Quarter-over-Quarter growth rates
- change the Balance Sheet ratios from 365 days to the correct number of days in the quarter. use date arithmetic in Excel to automatically calculate the number of days in a row that is white to avoid printing and then reference the number of days to that row
- update historical inputs with quarterly instead of annual figures
- don't forget to update the labels to the correct quarter
- since you are specifically following high-yield, your ratios will be off the full year results. it may not be a bad idea to have an annualized ratio each quarter, although this is less meaningful due to cyclicality

Additional Note: Unfortunately, while quarterly results can easily be converted to annual, quarterly results cannot be imputed from your annual totals. In order to build a quarterly projection model you need to input historical quarterly results (we would suggest at least 3 years) and based on your knowledge of the company, historical evidence of seasonality, etc., you have to forecast future quarters based on Q/Q growth rates, margins, etc. Read More

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by WST Expert 1.

added 11 years ago

Re: MERGER Debt Sweep
You would be correct. The revolver should be picked up first and then any excess cash AFTER that, would be used to prepay term loans, if any. Your correction to the formula is correct. Also, another note, we have determined that the first part of the formula, the entire IF part can be omitted. Only... Read More

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by WST Expert 1.

added 11 years ago

Re: Balancing the Core Model
The Balance Sheet must always balance! Formula Asset = Liabilities + Equity, so think of it this way, you have a house, that house is an asset worth $100,000, if you get a mortgage of $80,000 (the debt), the remaining $20,000 has to go where? Well that belongs to you, which is in the form of equity.... The Balance Sheet must always balance! Formula Asset = Liabilities + Equity, so think of it this way, you have a house, that house is an asset worth $100,000, if you get a mortgage of $80,000 (the debt), the remaining $20,000 has to go where? Well that belongs to you, which is in the form of equity. So when theory (Assets (100k) = Liabilities (80k) + Equity (20k) becomes reality is when you sell that house, you will pocket the 20k. Let's say now some time went by, and you paid off 10k on the mortgage. Well let's demonstrate what happens. The asset is still worth 100k, the liability (mortgage) is 70k, now where does that remaining 30k go? Well that's your equity. You see why it must "always" balance.

Now, in the context of the financial model, the revolver balances the model - think of it another way: say you make $100 of income this month. But you spent $120. The $20 difference is charged on your credit card (revolver). Next month, you make another $100, but you only spent $92. You have $8 of excess cash that 2nd month, which you will use to pay off your revolver of $20, leaving a net balance on revolver of $12.

A third way to explain it: As long as every item that changes on the IS and BS is reflected on the CF, you should balance. Why? Back to old school debits and credits and double-entry accounting. There's ALWAYS two entries for every transaction. Now, every item on the IS is reflected via Net Income and Retained Earnings via S/H Equity and Cash Flow Statement. So that takes care of IS integration. Go line by line thru the rest of the BS and you'll see all the working capital items reflected in CFO. Stuff like PPE is connected to CapEx (cash down), etc. Then, the Equity changes are reflected in CFF, leaving debt and revolver to cap off (see above paragraph).

Re: your iterations question - at some point the numbers don't change b/c Excel only calculates 15 decimal places. If Excel were to suddenly chanage that to 30 decimal places, then it would keep going and the numbers would change again. However, that one-gazillionth of a decimal difference has no material impact on our model. We usually observe no more than 30 or so iterations to balance, so a few hundred would be quite a bit actually. Read More

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by WST Expert 1.

added 11 years ago

Re: Insurance financial modeling
[quote="Theferrariboy":t1efjuct]During the course on CapEx depreciation, the video got stuck somehow. I couldn't watch it on my computer. Could you therefore please post the formulas for: - CapEx depreciation (CF rows 41-46) - PPE & Intangibles (BS row 23) - Depreciation & Amortiz... Read More

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by WST Expert 1.

added 11 years ago

RE: Footing my accretion/dilution model with reported numbers
Remember, an accretion/dilution model is a back-of-the-envelope analysis that encapsulates the *major* components and drivers of value in a deal. Therefore, it would be nearly impossible to replicate a real deal's numbers since the bankers would be building a super complex, fully integrated merger m... Read More

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by WST Expert 1.

added 11 years ago

RE: Quick & Dirty Basic LBO Model: text book
Generally, we shy away from textbooks because they tend to be academic in nature and requires you to read 400 pages of text to get to the 20 pages that one really cares about. If there is anything in particular you are looking for, let us konw. Else, there's always a search on amazon. Our book (not ... Read More

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by WST Expert 1.

added 11 years ago

Re: Short cut for increase/decrease decimal point
Please download our Excel shortcuts from our FREE EXHIBITS at www.wallst-training.com. At the bottom right of the shortcut sheet, there are instructions on how to insert into the Format menu. We've reproduced the instr... Read More

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by WST Expert 1.

added 11 years ago

Re: How would you go about valuing a company?
Thank you for your inquiry. However, this is covered in our Corporate Valuation class and it wouldn't be practical to explain each approach in this venue. Please go to: www.wstselfstudy.com/programs and purchase ... Read More

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by WST Expert 1.

added 11 years ago

RE: Circular reference problem in my model due to interest-HELP!
In general, circular references should be avoided whenever possible; however, you will legitly need a circ when calculating interest expense off average balance. (see our website and click on FREE RESOURCES for an exhibit on circular reference and Excel iterations). The workaround is to calculate of... Read More

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by WST Expert 1.

added 11 years ago