Hello all, been prepping with the WSO course, and am working on the PaySmart case. I have two questions, one specific to this case, and one that's more general:
(1) Minor point, but in the video solution, when projecting out the market share for US and Europe, Europe increases by the given 0.5% (from 4.0% - 4.5%) in the first year, but the US market share gain of 0.25% appears to be delayed by a year. Is this an error?
(2) In this example, no minimum cash balance was assumed. Instead, there was a floor of $100mm above which any "excess" cash is used for paydown. The deal is CFDF, but assumes an infusion of $40mm at the time of transaction to fund the BS (use of cash). The first year has negative cash flows, so we simply take some cash from the existing balance sheet cash of $40 that we put in.
My question is: in one of these cases in a real interview, if there is a minimum cash requirement or the free cash flow is negative beyond the existing cash balance, is it more acceptable to assume we use a revolver (making our own assumptions around commitment fee/interest) or can we assume a cash (equity) infusion in that year from the sponsor?
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