Miscellaneous

Question 1

How do you calculate a firm’s P/E ratio?

Answer 1

Equity Value / Net Income

Share Price / EPS where EPS = Net Income / Shares Outstanding

Question 2

What is PEG and why is it Used?

Answer 2

(P/E)/ annual EPS growth

Companies with higher growth rates tend to have higher P/E ratios and so controlling for that - PEG allows you to compare companies with different growth rates on an apples-to-apples basis

Question 3

Walk me through a DCF

Answer 3

UFCF
PV
WACC
Terminal Value
PV
Sum PVs = EV

Question 4

What is the difference between levered and unlevered FCFs?

Answer 4

UFCF is pre-capital structure (ie: interest expense) and thus available to all stakeholders

LFCF is net of interest expense and thus the amount of cash a company has on hand after it has met its financial obligations

Question 5

What is a terminal value?

Answer 5

Captures value of company’s steady state cash flows after forecast period (typically 60-80% of company value)

Question 6

What items result in a DTA?

Answer 6

SBC

Asset Write-Downs (very discretionary, so firms could possibly manipulate to their advantage)

Goodwill impairments (very discretionary, so firms could possibly manipulate to their advantage)

Amortization of intangibles

Question 7

How does $10 PIK interest flow through the 3 statements?

Answer 7

-8 NI

+2 Cash

+2 Assets

+2 L&SE

Question 8

Stock buyback or stock dividend? Which is preferable?

Answer 8

Pull answer from IBC Advanced Guide.

Question 9

What is a SPAC?

Question 10

What is the difference between IPOs, Direct Listings, and SPACs?

Question 11

Do the spin-off question from the weeds IBC recording.

Question 12

What is goodwill?

Answer 12

accounting construct that is the plug between the equity purchase value an the book value of equity, adjusted for certain items

Question 13

Difference between stock and asset sale?