Interview Questions - Price per share

Hey guys,

I'm prepping for an interview and I was given some questions by a friend, but not too sure about the answers to some. Here it goes:

Equity:

1) what is the price per share of a $100m company with 10 million shares? $10 (I got this one by myself lol)

2)The company wins the lotto and wins $100m, what is the new price per share? I'm tempted to say $20, but then again, if we assume the $100m is cash, should it have any affect on the equity value?

3)What if the company repurchases 40% of the shares at $25? What is the new share price?

4)How much is a company worth that will throw off $100MM in cash flow forever?

5)You have the opportunity to invest in a company that will pay back capital in 10 years and then cash flow will increase at 4% annually thereafter. Is this a good investment?

6) What will give you a higher value - terminal multiple or perpetuity growth?

Debt:

1) If you have a company with 3x senior leverage and 5x junior leverage, what happens when you sell a business for 8x EBITDA? (Someone told me that it is deleveraging for the senior debt, but I don't see how)

2) Imagine a company with a capital structure of 400 in secured debt and 100 in unsecured debt. What are some things you would need to keep in mind when investing in the unsecured portion?

Many thanks for your help!

 
Best Response

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