Fund Trivia
Who is Aidan McEachern? (1st semester JA)
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What is the difference between cash-based and accrual accounting?
Cash-based recognizes revenue/expenses when cash is received/paid. Accrual recognizes them when earned/incurred.
Why do we add non-controlling interest when calculating EV?
To account for the minority portion that you do not own so that EV and financial both include 100% of the company
What is the difference between a strategic buyer and a financial sponsor
Strategic Buyer — a corporation acquiring a target to integrate into their existing business
Financial Sponsor — a private equity firm acquiring a target purely as a financial investment, with the goal of exiting in 3–7 years at a higher valuation.
What is the formula for yield?
Coupon/Face Value
Provide 3 Joe Patt nicknames
J Powderplay, JPeezy, Joe Blow, etc.
Give 3 different connections through the 3-statements.
Net income, cash, debt, PPE/capex, working capital, dividends
Why does a DCF almost always produce a higher valuation than an LBO?
Return hurdle — An LBO buyer needs a 20%+ IRR. A DCF just discounts at WACC (typically 8–12%), which is a much lower bar, producing a higher PV.
Leverage constraint — LBO buyers are limited by how much debt the business can support. More debt = less they can pay in equity. A DCF has no such ceiling.
Exit dependency — LBO value is realized at exit (usually 5 years). If the exit multiple compresses or growth is slower, the math breaks. A DCF captures the full long-run cash flow picture with no forced exit.
What are the three ways to finance an acquisition?
Cash on hand, debt, or stock
What does an inverted yield curve mean and why does it matter?
Normally, long-term rates > short-term rates. An inversion (short > long) signals that investors expect future rate cuts, often due to anticipated recession. It's one of the most reliable leading recession indicators — every recession since 1955 was preceded by an inversion.
Who are the 3 Juniors abroad this semester. Has to be a 1st semester JA. (Full Names)
Miles, Nicole, Trisha
Flow $10 Increase in stock-based compensation through the 3-financial statements, 20% tax rate.
IS: Pre-tax income decreases by $10, taxes decrease by $2 (20%), net income down $8.
CFS: Start with net income down $8, add back SBC of $10, so operating cash flow is up $2. Cash on the balance sheet is up $2 — everything ties.
BS: Retained earnings down $8, APIC up $10, so equity is net up $2.
Name 5 characteristics that make a company a good LBO target.
Strong, predictable free cash flow; mature industry/company, clean balance sheet, strong management team, low working capital requirement, low future capex, feasible exit, strong competitive advantage and market position, possibility of selling underperforming assets, ability to scrap, margin improvement
What is the difference between an asset sale and a stock sale?
In a stock sale, the buyer purchases the seller's shares and inherits all liabilities. In an asset sale, the buyer picks which assets/liabilities to acquire.
Current price of crude oil futures?
$102.31
Name 8 holdings currently in the MEF portfolio
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Walk from revenue to levered free cash flow.
Revenue - COGS - Operating expense = EBIT * (1 - tax rate) = EBIAT + D&A - change in working capital - CapEx - interest expense
How do you calculate the Beta for a private company?
Do comps analysis. Unlever all betas. Fina average beta. Relever based on company capital structure.
What is the difference between a hostile and a friendly takeover?
A friendly takeover is negotiated and approved by the target's board. A hostile takeover is when the acquirer goes directly to shareholders (tender offer) or launches a proxy fight, bypassing the board entirely.
Title of WSJ front page article today?
The Secret Team Blowing Up Ford’s Assembly Line to Make a $30,000 Electric Truck
Which previous MEF member was known for wearing tight white pants?
CJ
A company takes on $100M in debt and buys equipment. Walk through the 3 statements.
IS: no immediate impact (depreciation hits later). BS: PP&E up $100M, Debt up $100M. CFS: investing outflow of $100M (capex), financing inflow of $100M (debt raised) — net cash change is zero.
Walk me through a DCF. (Has to be a first semester)
A DCF values a company based on the PV of its Cash Flows and the PV of its Terminal Value
You start by projecting our financials with assumptions about revenue growth, expenses, and working capital, Start with EBIT, Subtract Income Tax Expenses, End with EBIAT, Add back D&A, Less changes in WC, Less CapEx, End at Unlevered FCF (sum FCF projections), Discount Unlevered FCF using a discount rate (WACC), Calculate Terminal Value (2 methods), Discount Terminal Value to PV, Add PV of FCF to PV of TV = Enterprise Value, Less Net Debt = Equity Value, Divide by Diluted Shares Outstanding
Explain a poison pill defense strategy
A shareholder rights plan that triggers share dilution when a hostile bidder crosses an ownership threshold, making the takeover prohibitively expensive.
Name the last 3 Fed chairs from most recent to oldest
Kevin Warsh, Jerome Powell, Janet Yellen