1. How do you calculate the cost of equity using MMII, both when (a) debt levels are fixed
or pre-determined, and when (b) debt ratios are predetermined?
2. What is the difference between (a) WACC approach, (b) APV approach, FTE approach
and (d) Capital Cash Flows approach?
3. When should interest tax shields be discounted at cost of debt, and when should they be
discounted at unlevered cost of equity?
4. When can each of the valuation approaches can be implemented with relative Ease?
5. How do private equity funds work? (who are the general partners, who are the limited
partners?)
6. What are purchase price multiples, multiple arbitrage, and terminal value multiple?
7. How can high levels of debt increase the Enterprise Value LBO funds are willing to pay
for target firms?
8. How does the required rate of return on equity change at different stages of the LBO
depending on how the debt is being paid down?
9. What is the difference between debt and net debt, and why is the latter more important
for the purposes of calculating enterprise value?
10. What is the implication of goodwill amortization expense on calculation of financial cash
flows?
11. Why is the ISS' enterprise value approximately the same with and without the pursuit of
acquisition strategies?
12. When do you calculate the terminal value of interest tax shields when calculating
Enterprise Value using the APV approach?
13. When do you apply different multiple valuation approaches (WACC, APV, FTE etc.) in
one framework to derive the Enterprise Value of the firm?
14. How does the standard formula for calculating FTE change when the firm has excess
cash lying around? Specifically, the amount available to repay debt increases if the firm
has excess cash lying around.
15. What is meant by \"dividend recapitalization\" (debt-financed dividend), and when and why
PE firms may use it?
