What to do when key metrics are missing in a CIM?
Hi, everyone. I'm practicing mock PE cases (30 mins). For the financials part, I will look into EBITDA, CAPEX, D&A and NWC for FCF and try to estimate IRR range. However, I found sometimes these matrics are missing (except for EBITDA). What should I do if I cannot find CAPEX/D&A/NWC? How will you assess the return? Maybe I can assume PP&E stays the same so that Depre and CAPEX can be cancelled? But what about NWC?
In shorts, in a 30 mins short interview, how to quickly assess IRR when key matrics are missing?
Instead of assuming a stagnant PP&E balance, I’d assume capex > Dep due to inflation.
If you’re familiar with the industry, you can use a sales/capex ratio and then a D&A / sales ratio as well.
For OWC, it’s a bit harder clearly, however I think making a judgement call on whether they require funding (cash outflow) or are provided funding (cash inflow) if you are familiar with the space is plausible.
Explaining your assumptions on the above may be more impressive to some interviewers and less impressive to others - generally people prefer you explaining your thoughts rather than saying “it’s not in here I can’t do it”
I’d recommend sense checking the LFCF yield also to ensure the CF assumptions aren’t too ambitious
Thank you. Whether you can explain more about the inflation impact upon Capex & Depre?
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