Comments (13)

Sep 9, 2019

Assuming a tax rate of 40%, would the answer be 8.33%?

Calculation 1/((1-0.4)*x)=0.20, x=8.33?

WSO, let me know if I made a mistake

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Sep 10, 2019

Assuming 100% debt

Sep 10, 2019

Second that.

The earnings yield of your target is 5%, so x * (1 - 40%) = 5%. x = 8.33%

Equities/Debt mix doesn't have to be given out necessarily, as the cost from issuing equity would be 1/0.1 = 10%, and debt with cost < threshold of 8.33% could technically offset the difference with a corresponding mix.

Sep 10, 2019

How do you answer without knowing how much debt how much equity you are using?

Sep 10, 2019

you can't. You need to know the debt/equity mix

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  • Intern in Investment Banking - Mergers and Acquisitions
Sep 10, 2019

and if you know the ratios? How would you answer?

Sep 10, 2019

Can you share how you would answer the question for the following situations:

100% equity
75/25 equity
75/25 debt

Sep 10, 2019

Is this for Summer Analyst positions?

Sep 10, 2019

Yes

  • 2nd Year Analyst in Investment Banking - DCM
Sep 11, 2019

.

Sep 10, 2019

Worked at a top vc this summer. Most valuations were comps, really. Project out financials for the future 5 years then use comps. But valuation wasn't a huge part of my job - most of my time was spent on powerpoint.

Sep 11, 2019

Auto ding.

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  • Prospective Monkey in Investment Banking - Mergers and Acquisitions
Sep 11, 2019
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