Essay about 06 13 LBO Model Quiz Questions Advanced

Investment Banking Interview Guide Access the Rest of the Interview Guide Investment Banking Interview Guide, Advanced LBO Model – Quiz Questions Answers in bold. Table of Contents: †¢ †¢ †¢ Types of Debt and Financing Methods Financial Statement Adjustments and Debt Schedules Calculating Returns Types of Debt and Financing Methods 1. All of the following types of debt are typically â€Å"floating-rate† instruments used to finance an LBO EXCEPT: a. Subordinated Notes b. Term Loan A c. Term Loan B d. Revolver e. None of the above i. Explanation: The correct answer choice is A. All of the answer choices listed above with the exception of A are floating-rate debt instruments, meaning that its interest rate is not fixed (e.g. 8% each year until†¦show more content†¦5. Which of the following represent typical differences between Subordinated Notes and Mezzanine? a. Subordinated Notes have floating interest rates, whereas Mezzanine has a fixed interest rate b. The PIK interest option tends to be more common for Mezzanine c. Mezzanine often includes an option for investors to receive warrants that allow them to share in some of the deal upside d. Subordinated Notes are secured, whereas Mezzanine is unsecured e. None of the above i. Explanation: A is false because both Subordinated Notes and Mezzanine are â€Å"High-Yield Debt† and therefore have fixed interest rates rather than floating interest rates. B is true because while PIK 3 / 15 Investment Banking Interview Guide Access the Rest of the Interview Guide may exist for Subordinated Notes, it is much more common for Mezzanine. C is also true because since Mezzanine is considered â€Å"Equity level† in terms of seniority, sometimes the option to receive equity in the company is attached to this type of Debt. D is false because both of these are Unsecured, as are most forms of HighYield Debt (with an exception for Senior Notes sometimes). 6. Which of the following statements is FALSE regarding Payment-In-Kind (PIK) debt? a. A PIK loan does not require cash interest payments, but instead has the interest accrue to the loan principal b. Certain Term Loans have a PIK option c. Often, Mezzanine