medium · Private Equity accounting-flow
A sponsor models an LBO with $400M of debt consisting of a $300M Senior Term Loan (SOFR + 400 bps) and $100M of Mezzanine debt (12% PIK). In Year 1, EBITDA is $80M.
If SOFR is 5%, what is the impact of the Mezzanine interest on the Year 1 Cash Flow Statement?
- A $9M impact on cash after considering the 25% corporate tax shield.
- A $12M cash outflow in Cash Flow from Operations.
- Zero impact on Cash Flow from Operations, but a $12M increase in Financing Liabilities on the Balance Sheet.
- A $12M cash inflow in Cash Flow from Financing.
Sign up free to see the explanation and track your rank →
More Private Equity accounting-flow practice
- An acquisition of a company with $50M EBITDA is priced at a 10.0× multiple. The transactio
- If all other items are constant, what is the Free Cash Flow to Equity (FCFE)?
- When modeling the three financial statements in an LBO, how does a $10M increase in Deprec
- A target company has $200M of Assets, $120M of Debt, and $80M of Book Equity. If a sponsor
- A PE firm acquires a target for $500M, which has $100M in identifiable net assets at book
- Under US GAAP, how does an increase in depreciation of $10M affect the three financial sta
- With a 25% tax rate and a 10% discount rate, what is the approximate Net Present Value (NP
- In a 3-statement model, how does a $10 million increase in depreciation affect the financi