Posts by: WST Expert 1
Re: Core Model DCF - terminal cashflow
We are saying that NORMALIZED Terminal Year Unlevered Free Cash Flow is proxied with Tax-Effected EBIT b/c a mature, slow growth company has characteristics in which CapEx and depreciation net out over time. Please view the D&A video (part of our FREE resources in your login) for explanation as ... Read More
We are saying that NORMALIZED Terminal Year Unlevered Free Cash Flow is proxied with Tax-Effected EBIT b/c a mature, slow growth company has characteristics in which CapEx and depreciation net out over time. Please view the D&A video (part of our FREE resources in your login) for explanation as ... Read More
Re: Working Capital in FCF for Valaution Purposes
The idea behind changes in working capital is that when you value (or buy) an entity, you are buying the company on a going concern basis, able to support its own operations. if you agreed to purchase a company for $100 and it turns out that you still have to put in $10 MORE because there was no wor... Read More
The idea behind changes in working capital is that when you value (or buy) an entity, you are buying the company on a going concern basis, able to support its own operations. if you agreed to purchase a company for $100 and it turns out that you still have to put in $10 MORE because there was no wor... Read More
Re: Bank Modeling
Think of it like this. If you understand that GCO reduces the allowance for credit losses, then recoveries are the opposite, and as such, ends up increasing the allowance for credit losses. As you make more provisions each year (IS impact), the allowance for credit losses go up. As you charge off th... Read More
Think of it like this. If you understand that GCO reduces the allowance for credit losses, then recoveries are the opposite, and as such, ends up increasing the allowance for credit losses. As you make more provisions each year (IS impact), the allowance for credit losses go up. As you charge off th... Read More
RE: Merger Modeling Basics: about the goodwill amortization
If a deal is considered an Asset Deal or under a 338(h)(10) election, correct, technically there is no goodwill amortization, and instead, there is regular depreciation since the purchase price is thought of as an acquisition of assets as opposed to an acquisition of stock. If it is a true Asset Dea... Read More
If a deal is considered an Asset Deal or under a 338(h)(10) election, correct, technically there is no goodwill amortization, and instead, there is regular depreciation since the purchase price is thought of as an acquisition of assets as opposed to an acquisition of stock. If it is a true Asset Dea... Read More
Re: Ability to Pay Analysis
Recall, we said MARGINAL changes - so Synergies is a marginal change that only occurs as a result of the merger! So you must incorproate into your analysis as well. If you like, set synergies to zero, which is why we build a data table on synergies!
Recall, we said MARGINAL changes - so Synergies is a marginal change that only occurs as a result of the merger! So you must incorproate into your analysis as well. If you like, set synergies to zero, which is why we build a data table on synergies!
Re: GAAP requirement to recognize all known liabilities
the 40% applied to Taxable Income (TAX not GAAP) is the statutory rate.
It just so happens that the effective tax rate (GAAP) is very close to 40% as well since not much stuff is impacting the company from a permanent differences perspective.
the 40% applied to Taxable Income (TAX not GAAP) is the statutory rate.
It just so happens that the effective tax rate (GAAP) is very close to 40% as well since not much stuff is impacting the company from a permanent differences perspective.
RE: Capital leases - exclude vs include
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... Read More
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... 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
Re: Hedge Fund - why the double counting ???
From your message, it seems you are referring to the AUM calculation? Essentially, the LONG positions from the SHORT further increase your exposure - basically, you shorted securities, used the cash proceeds to then go and buy other securities. If necessary, please clarify the slide number or video... Read More
From your message, it seems you are referring to the AUM calculation? Essentially, the LONG positions from the SHORT further increase your exposure - basically, you shorted securities, used the cash proceeds to then go and buy other securities. If necessary, please clarify the slide number or video... Read More
Sources & Uses: - from the Merger courses, the legal structure can be stock or asset (most likely stock for an LBO, but not necessarily) - regardless of stock vs asset deal, debt refi'ed, etc is same treatment: you are buying the entire company - equity premium: based on appropriate valuation of... Sources & Uses:
- from the Merger courses, the legal structure can be stock or asset (most likely stock for an LBO, but not necessarily)
- regardless of stock vs asset deal, debt refi'ed, etc is same treatment: you are buying the entire company
- equity premium: based on appropriate valuation of the company
- excess cash: really means lower net debt (covered in our LBO Overview class) will make the equity injection less and thus, more attractive, correct
- various fees: again, please refer to LBO Overview course where there are several slides on various fees
Sources:
- cash: correct. usually a bridge loan is required since you don't have access to the cash
Valuation:
- TEV multiples: yes, after you do your valuation (and know how much to pay); also, this is quite often sensitized
P&L:
- D&A: doesn't usually include amortization of debt financing fees as the fees are capital structure related and technically go into Interest Expense; thus, it's not considered when calculating EBITDA
- Pro Forma: interest set to Year 1 primarily for smoothened leverage ratios (Interest coverage in particular); since the entire cap structure is altered, the last historical year of interest is irrelevant
PPA:
- correct to all of the above. Goodwill is still important - in this case, we assumed that the goodwill is re-allocated at the current cost basis, which is the implicit assumption when you don't do the full PPA as discussed in Merger courses
CF:
- debt financing fees: correct, non-cash expense in projection years as it was paid in cash during the deal; this is capitalized and amortized; hence the BS item change
Ratios:
- Cum. Debt Paydown: this is covered in the videos: just take Year 0 Pro Forma debt balance (fully anchored) and subtract the new Total Debt balance
- % Paid: take the Cum. Debt Paydown and divided by the Year 0 Pro Forma debt balance (fully anchored) and you'll have it
- your method is too complicated follow the videos! we show you the fastest and most efficient way to calculate! Read More