PWP - 1st Round

Question 1

Why PWP?

Answer 1

DE&I
Collaboration

Question 2

Why IB?

Question 3

TMAY

Question 4

Walk me through a recent deal.

Answer 4

Frontier and Verizon’s acquisition of their data centers, boosting its fiber network, accretive, expansion of broadband and wireless services - weaknesses, an overlap in competing areas of Frontier such as t-mobile. Frontier had a bankruptcy in 2020.
Several advisors like Morgan Stanley, Centerview, PJT Partners

Question 5

Recent market headline.

Answer 5

China’s antritrust regulator announced this morning. It’s launched investigation into NVIDIA - significant because Nvidia’s GPUs are critical to AI development, and could cause further disruption in China Its motivated by Nvidia’s acquisition of a US based software company, tied to political tensions. It shows that US China relations are becoming more strained, and it could lead to a tech trade war, causing disruptions within the supply chain. Nvidia’s stock has dropped from this investigation.

Question 6

How many planes are in the sky right now?

Answer 6

About 200 Countries in the world
10 Airports per Country
20010=2,000
A flight takes off and lands every half hour for 16 hours
162=32
32*2,000=64,000
Assuming a 3-hour flight time standard, 24/3 = 8 cycles/day
64,000/8=8,000 planes in the air

Question 7

What verticals are PWP engaged in?

Answer 7

M&A Advisory, Restructuring, Capital Advisory, Industry Specific Group like (Consumer, Healthcare, Energy)

Question 8

Walk me through a DCF.

Answer 8

1. Forecast FCF until sustainable
2. Calculate WACC
3. Estimate terminal value with perpetuity or gordon growth model
4. Discount the CFs to today
5. Calculate Equity Value

Question 9

Walk me through an LBO.

Answer 9

1. Calculate Purchase Price or Enterprise Value
2. Determine Debt available for funding with EBITDA multiple and subtract it from the total fund to get the equity funding
3. Project Cash Flows
4. Determine the sales price by multiplying EV/EBITDA with EBITDA at exit
5. Get to exit owner value on the deal, equity value for investors, their return
6. Use Exit Equity Value and Initial Equity Value to get IRR and MOIC projections

Question 10

What is the formula for WACC?

Answer 10

=(Weight of EquityCost of Equity) + (Weight of DebtCost of Debt)*(1-Tax Rate)

Question 11

Walk me through the three financial statements?

Answer 11

The income statement illustrates the profitbality of a company over a period of time (Revenues and Expenses, Net Income or Net Loss) Balance Sheet shows the A, L, SE at a snapshot in time. Cash Flow Statement shows CF Op, Inv, Fin activities over a period of time to show the balance of cash at the end of the period and where the sources of cash inflows and outflows

Question 12

Walk me through when a company has debt of $100 with 10% interest, corporate tax rate of 40% and when depreciation goes up by $10?

Answer 12

Income Statement - Interest expense goes up by $10 & depreciation expense goes up by $10, Income tax expense up by $8 - Net Income goes down by $12
Cash Flow Statement - Net Income is down by $12, add back depreciation expense of $10, add CF from financing of $100, subtract CF from operating of $10 interest payable, Cash goes up by $88
Balance Sheet - $88 Cash, Accumulated depreciation of $10

Question 13

What is the formula for cost of equity?

Answer 13

=Risk Free Rate of Return+Beta*Premium

Question 14

What is the formula for cost of debt?

Answer 14

(Interest Expense/Total Debt)*(1-Tax Rate)