Consider the “Cash Flow Available for Debt Repayment” metric in the Cash Flow Projections and Debt Schedule of an LBO Model. The statements below list similarities and differences between this metric and the “Free Cash Flow” metric, as it is normally defined and used in 3-statement models.Which of these statements list(s) a similarity or difference that is INCORRECT?a. Both figures deduct the Net Interest Expense but exclude Optional Principal Repayments on New Debt used to fund the LBO.b. Free Cash Flow is a component of Cash Flow Available for Debt Repayment, along with an addition for the Beginning Cash, a deduction for the Minimum Cash, and other possible adjustments.c. Free Cash Flow is capital structure-neutral, but Cash Flow Available for Debt Repayment is not because it changes throughout the LBO holding period as the company repays its Debt balance.d. The Change in Debt each year should equal the Cash Flow Available for Debt Repayment each year, but it will never equal the annual Free Cash Flow.e. Statements 1, 3, and 4 are all incorrect. f. Statements 1 and 2 are incorrect.g. Statements 3 and 4 are incorrect.h. All four statements are incorrect.
Consider the “Cash Flow Available for Debt Repayment” metric in the Cash Flow Projections
and Debt Schedule of an LBO Model.
The statements below list similarities and differences between this metric and the “
Cash Flow
Which of these statements list(s) a similarity or difference that is INCORRECT?
a. Both figures deduct the Net Interest Expense but exclude Optional Principal
Repayments on New Debt used to fund the LBO.
b. Free Cash Flow is a component of Cash Flow Available for Debt Repayment, along
with an addition for the Beginning Cash, a deduction for the Minimum Cash, and
other possible adjustments.
c. Free Cash Flow is capital structure-neutral, but Cash Flow Available for Debt
Repayment is not because it changes throughout the LBO holding period as the
company repays its Debt balance.
d. The Change in Debt each year should equal the Cash Flow Available for Debt
Repayment each year, but it will never equal the annual Free Cash Flow.
e. Statements 1, 3, and 4 are all incorrect.
f. Statements 1 and 2 are incorrect.
g. Statements 3 and 4 are incorrect.
h. All four statements are incorrect.
Step by step
Solved in 2 steps
