Question
Two answers required. The ratio between these two quantities is aimed to be necessarily greater than 1 and usually around 2 when creating an LBO, or leveraged buyout, model. For 10 points each:
[10m] Name these two quantities. The Modigliani-Miller theorem states that the enterprise value of a firm is unaffected by its value of the ratio of these two quantities, which is why it demonstrates capital structure irrelevance.
ANSWER: debt AND equity [accept the debt-equity ratio; accept debt investment or debt finance for debt; accept liabilities for debt; accept equity investment or equity finance for equity; accept assets minus liabilities for equity; prompt on D over E; prompt on capital for equity; prompt on partial answers]
[10e] In an LBO model, the investing firm generally aims for a minimum of 20% for the “internal” type of this quantity. This quantity, equal to final value minus initial value over initial value, measures the net gain of an investment.
ANSWER: rate of return [or RoR; accept internal rate of return or IRR; accept returns; accept return on investment or ROI]
[10h] LBO models generally aim to maximize the internal rate of return and the interest coverage ratio, which is equal to this quantity over interest expenses. This quantity is equal to gross profits minus operating expenses.
ANSWER: earnings before interest and taxes [or EBIT; prompt on operating profit or operating income; anti-prompt on earnings before interest, taxes, depreciation, and amortization or EBITDA; anti-prompt on EBITDAR]
<Social Science - Social Science - Economics>
Summary
| 2024 ARGOS @ Chicago | 11/23/2024 | Y | 6 | 16.67 | 83% | 50% | 33% |
| 2024 ARGOS @ Columbia | 11/23/2024 | Y | 2 | 15.00 | 50% | 50% | 50% |
| 2024 ARGOS @ McMaster | 11/17/2024 | Y | 5 | 6.00 | 40% | 20% | 0% |
Data
| BHSU Rebirth | Who is the Colleen Hoover of the Zulus? | 0 | 0 | 0 | 0 |
| hawk two of | Clown Squad | 0 | 10 | 0 | 10 |
| BHSU ReFantazio | Music to Help You Stop Smoking | 10 | 10 | 10 | 30 |
| Clown Senpais | Northeast by Northwestern | 10 | 10 | 0 | 20 |
| That Feeling When Knee Surgery Is in Five Days | Notre Dame | 0 | 10 | 0 | 10 |
| WashU | The Love Song of J Alfred PrufRock and Roll All Nite (and Party Every Day) | 10 | 10 | 10 | 30 |