Practice

A Term Loan's rate is set at MAX(2.0% floor, benchmark rate) + 4.0% spread. If the benchmark rate is currently 1.2%, what interest rate does the company pay?

A PE firm invests $900M total: 1/3 in Preferred Stock earning a fixed 12% return, and 2/3 in Common Equity earning a 28% IRR. Approximately what's the blended IRR on the total investment?

A company has $200M of Subordinated Notes outstanding at exit, and the applicable call premium at this point in the schedule is 103% of principal. How much cash does the company need to fully retire this Debt?

Beginning Cash is $40M, Free Cash Flow for the year is $90M, Minimum Cash required is $60M, and there are no mandatory repayments this year. How much is available to repay Debt?

A PE firm invests $400M and exits after 5 years with $1,000M in proceeds. What's the approximate IRR?

A PE firm invests $300M and exits after 3 years with $900M in proceeds, with no interim cash flows. What's the approximate IRR?

A company has $80M of EBITDA and is acquired at a 9.5x EBITDA multiple. What's the Purchase Enterprise Value?

A PE firm acquires a $150M EBITDA company using 50% Debt at an 8.0x purchase multiple. By Year 3, EBITDA has grown to $225M and the exit multiple stays the same. Assuming the company generates no extra Cash and repays no Debt beyond what's already required, what's the minimum MoM multiple the PE firm could realize?

A PE firm uses an $800M Shareholder Loan with 8% PIK interest. How much PIK Interest accrues to the loan's principal in Year 1?

A company's EBITDA has grown to $250M by Year 5 and it's sold at a 9.0x exit multiple. What's the Exit Enterprise Value?

Using the approximation IRR ≈ (100% / Years) × 75% for a 2x multiple, estimate the IRR for a 2x multiple achieved over 4 years.

A company has 60 million shares outstanding at a $12.00 per-share purchase price. Existing management rolls over 9 million of those shares instead of cashing out. How much does the Rollover reduce the PE firm's required funding by?

A company generates $120M of Free Cash Flow in a year. Beginning Cash is $60M and Minimum Cash required is $90M. How much can go toward repaying Debt?

A tranche of Debt amortizes at 20% of its original $150M principal each year, but only $18M remains outstanding. How much is repaid this year?

Using the approximation IRR ≈ (200% / Years) × 65% for a 3x multiple, estimate the IRR for a 3x multiple achieved over 4 years.

Beginning Cash is $40M, Mandatory Debt Repayments are $90M, Free Cash Flow is $60M, and Minimum Cash required is $80M. How much must the company draw on its Revolver?

An LBO's initial Investor Equity is $700M, and the Exit Equity Value before options is $1,400M, with a 5% options pool. Using the quick-and-dirty method, what's the PE firm's exit proceeds after the options pool?

An LBO's initial Investor Equity is $600M, and the Exit Equity Value is $1,100M, before accounting for a 10% options pool. Using the quick-and-dirty method, what are the PE firm's exit proceeds after the options pool?

A company's post-deal leverage implies a BB credit rating, corresponding to a 4.5% default spread. The 10-year government bond yield is 3.5%. What interest rate should you assume on this company's Debt?

Using the same structure (MAX(2.0% floor, benchmark) + 4.0% spread), if the benchmark rate rises to 5.5%, what interest rate does the company pay?

A company has EBITDA of $40M and Debt/EBITDA of 3.0x. What's total debt?

A Term Loan tranche amortizes at 15% of its original $400M principal each year, but only $45M of the loan remains outstanding. How much is repaid this year?

A waterfall structure allocates 10% of proceeds to management up to a $400M threshold (90% to the PE firm), and the deal generates exactly $400M in total Exit Equity Proceeds. How much does management receive?

A PE firm invests $500M and receives $1,250M in Exit Equity Proceeds after 5 years, with no interim Dividends. Using the quick rules of thumb, what's the approximate IRR?

A PE firm buys a $100M EBITDA company at a 10.0x multiple, using 5.0x Debt/EBITDA. It plans to exit in 5 years at the same 10.0x multiple, with no Debt repaid and no extra Cash generated. What EBITDA is needed to achieve a 25% IRR (~3.0x multiple)?

After Mandatory Repayments, a company has $140M of Cash Flow Available for Debt Repayment. With a 40% cash flow sweep, how much of the remaining Debt is optionally repaid?

A company executes a $120M Dividend Recap with $3M in financing fees. By how much does the Debt's book value on the Balance Sheet increase?

A company executes a $150M Dividend Recap with $4M in financing fees. By how much does its Cash balance decrease?

A PE firm wants to use 4.5x Debt/EBITDA to fund the acquisition of a $90M EBITDA company. How much Debt will it use?

A PE firm agrees to a $50M Earn-out payment to the original selling shareholders, payable in Year 2 if the company hits its EBITDA target (which it does). Its Investor Equity was $500M, and its Exit Equity Proceeds in Year 5, before considering the Earn-out, are $1,300M. What MoM multiple does the PE firm actually realize after the Earn-out payment?

A company's Accounts Receivable balance is $80M at the start of an interpolation window and grows to $104M by the end of it. Using a stub-period fraction of 0.60, what's the interpolated balance at the stub close date?

Exit Enterprise Value is $2,000M and Net Debt at exit is $350M. What are the Exit Equity Proceeds?

A bond with a $1,000 Face Value is issued at 94% of face to boost its yield to investors. What's the Original Issue Discount (OID) in dollars?

After mandatory repayments, a company has $120M of Cash Flow Available for Debt Repayment, and its cash flow sweep is 60%. How much optional Debt repayment is made (assuming enough Debt remains)?

A PE firm acquires a company for a $1,500M Purchase Enterprise Value. The company's identifiable net tangible and intangible assets, after write-ups, are valued at $900M. How much Goodwill is created?

A company issues $150M of Debt with $6M in financing fees. What's the initial book value of the Debt recorded on the Balance Sheet?

Using the same deal as above ($150M EBITDA, 8.0x purchase multiple, 50% Debt, $600M Investor Equity, $1,800M Exit Enterprise Value), if the company instead repays its entire $600M of Debt by Year 3 and nothing else changes, what MoM multiple does the PE firm realize?

Initial Debt used in an LBO is $600M. Over the holding period, the company repays $200M of principal and generates no extra Cash. What's the Net Debt at exit?

A PE firm wants a 15% IRR over 5 years (~2.0x multiple) and expects Exit Equity Proceeds of $900M. What's the most Investor Equity it can contribute?

Beginning Cash is $30M, Free Cash Flow is $50M, Mandatory Debt Repayments are $70M, and Minimum Cash required is $40M. How much must the company draw on its Revolver?

A PE firm buys a $150M EBITDA company for an 8.0x multiple, funded with 55% Debt. What's the Investor Equity?