LBO MODEL EXAM QUESTIONS AND ANSWERS
WITH COMPLETE SOLUTIONS VERIFIED BY EXPERTS
basic LBO model
1. make assumptions about purchase price, debt/equity ratio, interest rate on debt and
other variables
2. create source =s and uses section to show how you finance transaction
3. adjust balance sheet for new debt and equity figures and add in goodwill/intangibles
on assets side
4. project income statement, balance sheet, cash flow statement and determine how
much debt is paid off each year
5. make assumptions about exit after several years using EBITDA Exit Multiple
when would you use leverage when buying a company
to boost your return
what variables impact an LBO model
purchase and exit multiple
ideal LBO candidate
stable and predictable cash flows, low risk businesses, not much need for ongoing
investments
real life LBO
mortgage a house
WITH COMPLETE SOLUTIONS VERIFIED BY EXPERTS
basic LBO model
1. make assumptions about purchase price, debt/equity ratio, interest rate on debt and
other variables
2. create source =s and uses section to show how you finance transaction
3. adjust balance sheet for new debt and equity figures and add in goodwill/intangibles
on assets side
4. project income statement, balance sheet, cash flow statement and determine how
much debt is paid off each year
5. make assumptions about exit after several years using EBITDA Exit Multiple
when would you use leverage when buying a company
to boost your return
what variables impact an LBO model
purchase and exit multiple
ideal LBO candidate
stable and predictable cash flows, low risk businesses, not much need for ongoing
investments
real life LBO
mortgage a house
