Financial Modeling Self Study Program

Comments / Suggestions / Questions…

In the spirit of adding some interactivity to this site, please post your comments and suggestions.  Also, feel free to post your questions about investment banking and I will try my best to answer them. 

-Andrew

417 comments to Comments / Suggestions / Questions…

  • Joe

    Hi,

    I am a junior in undergraduate school currently going through investment banking interviews for summer internships. A question I am often asked is “Where do you see yourself in five years (or 10 years)?” Is it ever ok to mention you would entertain the possibility of joining the buy-side, or should you answer with something vague such as “I’m not sure exactly what I want to do in 5 years, but I know I want to stay in finance in a managerial type of role and I know that banking will help me to achieve the toolset and experience needed to get to that point”.

    Thanks.

  • Andrew

    Joe,
    Since most analyst programs are 2 years, I don’t think you need to portray yourself being in banking for the next 5 or 10 years post graduation (very different than for Associate/Summer Associate interviews). Having said that, I do prefer the more vague answer like you wrote – something like I’m really looking forward to learning a lot, getting the deal experience, working really hard and with great people, etc. And honestly we’ll see what happens down the road.

  • Ben

    Hi,

    I am preparing for an interview in IB and I have two questions:
    1) Is it possible that that a merger were the acquired company has a higher PE-Ratio than the acquiring company is still accretive? I have heard so but I don´t know how this is possible?
    2) How do you calculate the IRR in an LBO?

    Thanks for your help!!

  • Mady

    Hi Andrew,

    What would be your answer to this question: in the context of an acquisition, what would be the options to limit both dilution and credit downgrade risks?

    Thanks for your help

    • Andrew

      Mady,
      Was that an interview question? Assuming a fixed purchase price, I don’t know that there is an answer. If you pay with stock you have dilution (unless the deal is already accretive – but lets assume it is not). If you pay with cash, you either use cash from the balance sheet or issue debt, either way your credit is impaired (if the deal is small, you may not be at risk for a downgrade). Long story short, while the deal could still be accretive because of synergies, I don’t know that there is an answer for an “option” that both limits dilution and credit downgrade risk, other than to use a combination of stock and cash as a compromise. If you have other ideas, feel free to reply.

      • Mady

        Yes, it was.

        I thought about general conditions that must be completed in order to limit the dilution and credit downgrade risks.

        – A company should consider acquiring only campanies that are 20% or less of its size
        – Acquiring in low M&A activity time in your industry
        – financing the transaction with a mix of equity and cash

  • elle

    Hi, on the page 62 of your book, there seems to have a typo in the front of the operational income formula: the EBIT is supposed to stand for earnings before interest expenses(the book says “income”) and taxes. : ) BTW, it is a great book!

  • Billy

    Hi all,
    Need a hand with the below if possible:
    1. What happens to the three financial statements if you manage to save 50 dollars of Cost of Goods Sold?
    2. Whats the optimal capital structure for a firm? (i didn’t think there was/is a formula as such, more that it depends on the type of firm)

    any help would be great!

  • Judith

    Hi Andrew,
    What do you think, is it easier for people from Corporate Banking or from Sales & Trading to break into IB? Which skills and experience are viewed as more valuable?

    Thank you for your reply.

  • Sandeep

    Hi Andrew

    I have question to you. What will be the impact on 3 financial statement, if a company forgets to charge depreciation in Income Statement ?

    I try to answer it but couldn’t get it right. For instance, Lets say in IS, Ebitda is 50, PBT is $50 (since forget to charge $10 as depreciation and there is no interest expense, tax rate @ 40 %).
    Net income will be $50 *(1-40%) i.e. 30..NI is up by $6
    Under Cash Flow, NI will appear in CFO, and hence it will increase by $6
    Balance Sheet, Cash & Retained earning will increase by $6 on Assets and Liabilities side, respectively.
    Here Still I’m not satisfied with this answer. I think am missing out something..Please help me on this as this is the basic question which is being asked in IB interview

  • Anonymous

    What is minority interest

  • Bill

    Hi Andrew,

    Will I be asked about things like “What has happened in the world for the past 50 years?” or will I be asked to give my own opinion on a current issue?

  • Bill

    Hi Andrew,

    Thanks for the response on the last question! Another question I have is that if I want to apply to multiple banks to better my chances, should I only apply to the ones that I’ve networked with? I’ve heard that internships are extremely networking reliant and if you haven’t talked to some analysts don’t even bother applying.

    Also, is an extremely high GPA required for the internship position? Would a lower GPA completely takes out my chances?

    Thanks!

    • Andrew

      Bill, You’re doing to have a much greater chance with the banks with which you’ve networked, but that doesn’t mean you should ignore the others. “Cast a wide net” is usually good advice. But you are correct that it is low probability with firms where you haven’t spoken to people. A lower GPA is a red flag and certainly makes recruiting more difficult but it is not an insurmountable problem if you network AND if you have a good story/reason for your GPA.

  • Bill

    Hi Andrew,

    Another quick question for you. During an informational interview, an alumni at Goldman asked me “Why do you use FCF instead of EBITDA or net income when doing financial modeling?” What is the answer to that?

    p.s. I also have bought your book and find it extremely helpful! However, I could find the answer to the question in the book. If I missed something, please let me know!

  • Jerry

    Andrew,

    Thanks for a great website! If I’m trying to schedule weekend trips to New York with bankers that I’ve networked with, what should I talk about during our 20-30 min coffee chat? I’ve already talked to them over the phone about their experiences. Do I kinda ask them similar questions again?

    Also, is it ok for me to ask for a possible visit to the office? If so, should I only ask the more Senior bankers (VP, MD)?

  • Joe

    Hi Andrew!

    I don’t have a question, just wanted to say thank you for this wonderful website. I read through all the technical questions at least a few times before my interviews, and I was so prepared that I knew my technicals down cold, which helped me land a full time investment banking gig.

  • Ben

    Hi
    I’m currently 14 and would like to pursue a career as a banker some day. Is there anything I can do now that would help my chances of getting this job?

    • Andrew

      Ben,
      Get good grades in high school, score high on your standardized tests and get yourself into a top college/university. That maximizes your chances of becoming a banker if that’s what you want. Other than that, reading up on business, finance and economics and keeping up with related news will help you become more familiar with the industry.

  • Nav

    Just had a general question on getting into ibanking. I currently have a background as a trade assistant. There are a couple course that I will be taking that teaches financial modelling and lbo analysis. My question is how difficult will it be to transition from a trading environment to the more banking side? And it it worth pursuing?

    • Andrew

      It is hard to transition into investment banking from any other functional finance area including trading. That’s not to say impossible but hard. Courses that teach modeling can help you at the margins (they show your serious interest and can help you in an interview) but they won’t be what gets you a banking job. You’ll have to network your way in to interviews (unless you go the MBA route, assuming you are pre-MBA).

  • James

    Hi Andrew,

    The website and all the content is amazing, thank you for sharing this info. Thanks to your website I have managed to secure and summer internship.

    However I was wondering if you had any advice on how to dominate your summer internship and make sure you receive a full time offer?
    And if there is anyway you can make sure you get staffed on deals and impress your team?

    Many thanks
    James

    • Andrew

      James,
      Thanks and I’m glad you’ve found the website helpful to you. The most important thing about being successful in your summer internship is attitude. Be willing to do anything asked of you and do it really well and with a great attitude. Even better, be proactive. Ask everyone what you can do to help (without being annoying about it). The more work you do, the more people you work with, the greater your chances of getting the full-time offer. Make sure you check your work a lot – you want the bankers to have confidence in what you do. Sometimes staffing is out of your control so don’t be jealous if another intern gets on a deal while you are on a pitch or gets on a “better” deal than you. Don’t try too hard to impress – just work as hard as you can, do the best work you can, be proactive and have a great attitude.

  • Aman Trivedi

    Hi,
    I am a Non-MBA mechanical engineer working in IT sector for BFSI industry.
    I would like to know that to what extent would a CFA (level 1 or 2 or 3) certification be helpful in securing a call for an analyst role from any of the bulge bracket banks. Also what do you think about the chances of converting that call?

  • Mike

    Hi, I’m realizing that I don’t know when/where Private Equity firms get their money out in an LBO deal. For example, I have been taught to model, but the returns (IRR, cash on cash, etc) don’t seem to have the PE carry (~20%) taken out of it. If the 20% was taken out of the returns, does that not lower the IRR for investors. I believe I’m overlooking something and appreciate you clarifying. Thanks!

    • Andrew

      Mike,
      You are correct – LBO models do not include the fees paid to the General Partner (GP – the pe firm). That’s just the way it is done. So yes, the true return to the LP is lower after carry and other mgmt and transaction fees paid to the GP.

  • Filip

    “IF YOU WERE THE CEO OF OUR COMPANY, WHAT MAJOR CHANGES WOULD YOU MAKE IN HOW THE BUSINESS IS RUN?”

    What would be a good answer to this question in an investment banking interview?

  • chris

    i read your book how to be an investment banker ,it’s really intersting , but how to find the end-of-chapter question’s answer in wiley ?

    i see the password ,but i dont know the email required to access the answer

  • Tom

    Hi,

    Could you post a detailed answer for that question:

    What is Associates (“Shares in Assocatiates”) and why do we substract it in the Enterprise Value formula?

    (In the same way of: “What is Minority Interest and why do we add it in the Enterprise Value formula?”

    Thanks!

  • Sean

    I would like to ask a minor question about daily life in investment banking. How common it is for a banker to use a Macbook? What are pros and cons of using a Macbook compared with a PC laptop, such as MS Office or appearance? If PC is better, which brand and model is popular and why?
    Thanks for attention!

    • Andrew

      To my knowledge, all major banks still use PCs, not MACs. I don’t know about specific models but I’d guess Dell (for desktops) and Lenovo (for laptops) are probably most popular.

  • Amir

    Dear Andrew, Do you know any resource that deals with areas of an investment back that are not covered here? (capital markets, equity research, prop trading)
    Thanks a lot for the site

  • Dear Andrew,
    First of all, thank you for writing the book and providing the site. Secondly, I’m an engineering researcher but I’m gradually drifting towards economics,finance and banking. In your book, at the bottom of page 108 you have written
    1-” However, for generations now, the governments and central banks of the world,…, have preferred to have perpetual moderate inflation”. Can you please recommend books, papers, articles that would further explain this phenomenon for me.
    2- Also, at the bottom of page 108, you have written that ” Throughout most of recorded history, the natural state of things was deflation at least in times of peace. Only in war times and following discoveries of new sources of precious metals was inflation the norm.” Again, can you please recommend books, papers, articles that would further explain this phenomenon for me.
    Thank you very much.

    • Andrew

      Mohammad, Thanks for reading the book and sorry for not citing sources in it. In the next few days when I have some more time, I will get back to you again here with some sources.

  • Umair

    Andrew,

    Thank you for your website. It is a very good resource for university students looking to get into the industry. I have started as a full time analyst about 2 months ago as an off cycle hire. The learning curve for this job is very steep. Even at 2 months, I feel I’m not performing well at my job. Any task given to me by the seniors requires the help of the 2nd year analysts in the group. What takes me 4 hours to do can be done by them in an hour or two. This makes me feel bad about myself and then lowers my performance even more, like a downward spiral.

    How long does it take for a new analyst (off-cycle with no training) to get good or at least competent in investment banking?

    Thanks!

    • Andrew

      The learning curve for a new analyst is definitely steep. In my experience it takes a new analyst (or associate) about 9 months before they are really adding any value. So don’t feel bad – your experience is normal. Those first 9 months are really hard because you feel like you don’t know what you are doing. Then it takes about 2 full years before things “click” and you really feel like you totally “get” the job. That’s why 3rd year analysts are so valuable. Hang in there.

  • James

    Hi Andrew,

    Is there an easy way of summarising due diligence reports, post an IM?
    If the DD reports comply with the IM, do I just focus on things that have caught my eye or is there a something in particular that I should devote my attention to?

    Kind Regards,
    James

  • shruti

    why we take minority interest from balance sheet while adding to enterprise value?

  • Joe

    Hi Andrew,

    I was asked in a recent interview: Let’s say that there are two companies, and just assume that they are in the same industry and make the same exact product. Both companies have the same EV/EBITDA multiple, but different P/E multiples. How can this be?

    Also, let’s say it’s the exact same scenario but both companies have different EV/EBITDA multiples but the same P/E multiple, how can this be?

    Another question I was asked was in an LBO model why do we assume that the exit multiple is equal to the entry multiple?

    Thanks!

    • Andrew

      Hi Joe,
      Thanks for posting these technical questions that you received. With regards to EV/EBITDA being different from P/E multiples, the biggest difference (and best interview answer) would be due to capital structure differences. The ‘P’ in ‘P/E’ reflects equity only while EV reflects the value of equity and debt. EBITDA reflects operating income plus D&A but not interest expense while Earnings (‘E’) is after interest and taxes. You could easily make some simple assumptions and work out examples where EV/EBITDA would be the same for two companies but P/E different and vice versa. With regards to exit and entry multiples being the same in an LBO model, I think the best answer is that making them the same is the most conservative assumption in that you are assuming market conditions are the same upon exit as they are now and not assuming any multiple expansion. It is also the easiest assumption to justify, something very important in investment banking.

  • Renos

    The P/E multiple is taking into account the effect of the capital structure given that it is after interest which is not in case with the first comparable metric. The difference in P/E ratio can be affected by differences in interest expenses imposed by different loans, amortisation of goodwill purchased etc. Another reason is based on the value of the numerator – price per share is affected by market/investors expectations on the performance of the company in the upcoming years. i.e. one company is growing the other is at the maturity phase.

    For the last question i would assume that the exit multiple is usually the same as the entry multiple for few reasons:
    1) the acquired company is a mature one so do not expect significant growth over the 5 year period
    2) thats the minimum multiple they will accept within the short time frame of 5 year period where the company is usually sold

    If the PE firm believes that the target company is undervalued because is not doing well but it has significant upside potential then at exit they will use a higher PE ratio to reflect the growth and synergies achieved at the end of the LBO.

    Hope this helps.

  • Lea

    Does asset manager and income strategist also part of investment banking?

    • Andrew

      Lea,
      I discuss the structure of an investment bank in my book but briefly, it depends on your definition of investment banking. An investment bank such as Goldman Sachs or Morgan Stanley does many different things, such as asset management, trading, wealth management and investment banking. The investment banking division is the group that provides corporate finance advice to mostly companies and helps execute capital raising and M&A transactions. So asset mgmt and income strategist are part of the overall activities of an investment bank but not really part of corporate finance/investment banking activity. Sorry if this is confusing but that’s just the way it is.

  • Tyler

    Hi Andrew,

    I am a Sophomore at a non-target with no previous finance experience besides a few basic classes about finance and econ and accounting. I am trying to find work experience for this summer. What would be the best thing for me to do, to gain experience in finance and some things I could do to put on my resume so I could land a sophomore internship? Thanks!

    Tyler

    • Andrew

      Tyler,
      My advice is sort of obvious, but the best thing you can do is to get some kind of real finance experience. Likely that won’t be investment banking since most investment banks only hire summer interns that have finished their junior years (rising seniors). But plenty of institutions large and small will hire sophomores for other areas of finance such as wealth management/private banking, asset management or brokerage. You might have to reach out and network your way into these kinds of opportunities but also check with your career services dept if they keep a database of or advertise such internships. Reach out to local firms (or local offices of large firms). You don’t necessarily have to be in a major market such as New York to get a good internship experience your sophomore year. Next year it will important to try to land a real IB internship if that’s what you want to do post-graduation but this year just try to get something finance related.

  • Sara

    I have question for investment bank class, if you can give me answer please

    As you are aware, over the past year our stock price has more than doubled, on a riskadjusted
    basis, with no appreciable change in capital structure or financial performance.
    You may recall that our last successful product launch was more than five years ago and
    the market for it has reached saturation, i.e., growth follows GDP growth. Because of the
    weak economic conditions we have curtailed R&D expenditures over the past four years
    and we have no successor product in the pipeline.
    Is there any reason for us to be concerned about the current increase in our market
    capitalization?

  • Anonymous

    The current increase in the market share can be explained for a number of reasons: first it would be that the last product launch has been so successful that during the past years the company managed to achieve significant profits and cashflows. It is now a cash cow in its cycle. Given that the market is saturated now you would expect that the company is a market leader in the specific product if it still manages to achieve high returns which are reflected in a higher share price. However, looking at long term this might not be sustainable given that the product will become outdated and if there is no successor then the share price will likely to fall. Also bear in mind that the increase in share price might be reflected through higher dividends issued than expected or the company went through a share repurchase programme but more information will be needed.

    Given the company is unable to produce a successor product it would be advisable to use the high share price to fund an acquisition to diversify into new markets and products to offset the likely impact of a possible future share price decline.

  • Victor

    Hello Andrew,
    thanks for such good inside.
    I’m 31 and working in audit for a Big 4. But now consider to change the way, because it becomes boring. I want to use my skills obtained during the work with financial statements but understand that it is impossible to start in invetment banking sector for me due to age. Do you have any advice is there are a chances to find a job in valuation and financila modelling areas?

    thank you and good luck

    • Andrew

      Victor,
      You are correct – it is very difficult to move from Big 4 accounting to investment banking unless you get an MBA from a top school in between. Many MBA students have accounting backgrounds and they tend to very well in the recruiting process for investment banking. If an MBA is not an option for you, then your best bet, as you mention, is to try for something like valuation services. Valuation is sort of a hybrid between an accounting firm and investment bank. Look at firms like Duff & Phelps, Houlihan Lokey. To be honest, I don’t know how easy it is to make the transition but if it is what you want to do, then you should try.

  • Joe

    Hi Andrew,

    Can you explain why in an LBO, there is the creation of intangible assets such as goodwill and capitalized financing fees? This is probably a simple question but do not have much experience with LBOs so am curious in case I am asked in interviews.

    Thanks!

    • Andrew

      Joe,
      An LBO is a type of M&A transaction (technically a change of control transaction). On a change of control transaction, accountants have to come in and value the assets of the company being acquired. This is known as a purchase price allocation. Assets are marked to fair market, which can be up or down from where they where on the balance sheet prior to the transaction. In addition, as part of this process, intangible assets such as brandnames, trademarks, patents, etc. can be created on the balance sheet. The accounting rules also allow financing fees to be amortized over time, which is another type of intangible asset. Essentially, whatever value is left over (i.e. the difference between the purchase price and the fair market (new) value of all tangible and intangible assets) is called goodwill. Goodwill is not amortized but must be tested for impairment (annually, I believe). Hope this helps.
      -Andrew

  • Ayoub

    Hello Andrew,
    Thank you for the amazing website!

    I am currently a Junior undergrad student double majoring in Finance and Mathematics with a 3.9 GPA in a Non-target university in Morocco. I have done 2 internships so far, one with Philip Morris International after my sophomore year, and one with a government real estate development agency after my freshman year. Do I still have a shot in Investment Banking?
    I am applying for internships abroad (mainly Dubai and perhaps London) for this upcoming summer, though I am not sure if I really stand a chance against local applicants for target schools. Any advice on how to approach this issue?

    Thanks!

    • Andrew

      Ayoub,
      Glad you have found this site useful. I’m not as familiar with recruiting in Dubai as I am in the U.S. I think you have a shot at investment banking, but you have to work harder at the networking aspect than students from target schools. As much as you can, reach out to the banks you are interested in, and specifically to bankers and try to get yourself into the interview process. There is no magic advice here – it takes effort and perhaps luck. It is not easy but not necessarily impossible either. Best of luck.
      -Andrew

  • Hasya

    hi, i want to ask why the merger and acquisition do not affected the net profit margin, earning per share and return on equity even though they got significant relationship ?

    • Andrew

      Not sure I understand your question. Profits, EPS and ROE will change after an M&A transaction. In the case of a public company, that’s why bankers do an accretion/dilution analysis.-Andrew

  • Kaitlin

    Hi Andrew,

    Thanks for this great site!

    I was wondering, since currently I’m a sophomore, what kinds of opportunities with investment banks should I look for for the summer? I notice some bulge brackets have programs for sophomores but many of those have passed deadlines. Any suggestions on how I could get involved this summer?

    Thanks,
    Kate

    • Andrew

      Hi Kate,
      It is unusual to secure a true investment banking internship for your sophomore year (junior year is when banks hire). But I agree, it is very helpful to secure an internship that gives you some finance experience for this summer. Since you’ve missed the bulge bracket deadlines, you can try smaller banks as well as satellite offices of large banks, especially in brokerage and wealth management. If your school has a jobs/internship board, make sure to use it, but a lot comes down to networking and reaching out directly to firms in which you might be interested. Try to find out where students from the class ahead of you might have interned. And just because deadlines have passed doesn’t mean you can’t still reach out. -Andrew

  • Jim

    Question…Just something I always wondered about. I understand the concepts of valuation but one thing always puzzled me. Why do we value on multiples of EBITDA when we dont pay with EBITDA but with Free Cash Flow? Looks like a trick To get a higher price! EBITDA is $100 at a 5 multiple thats $500. FCF is $40 (which is what we have to pay off principal) which is a 12.5 multiple. Am I missing something? Or was herbert Allen right that over a long weekend he could teach his dog to be an investment banker LOL! Thanks

    • Andrew

      Hi Jim,
      Good question. The answer is twofold. First, EBITDA is considered a proxy for free cash flow. Not a perfect proxy but reasonably good in most instances. Second, it is easy to calculate. Most of the time that investment bankers are calculating EBITDA multiples it is for the purpose of comparing one company’s multiples with those of other similar companies (“comparables” or “comps”) for valuation purposes (as you noted). In theory you are exactly correct that using FCF would be a better metric. But, as I said EBITDA is a reasonable approximation and easy to calculate. Calculating FCF requires not just more work but significantly more judgement, which can lead to a worse off apples-to-apples comparison than using EBITDA. Having said that, you will see bankers do valuation multiples using FCF (e.g. EV/FCF) along with other metrics (e.g. EV/Revenue, P/E). But, EBITDA tends to be key metric for most industries.

      I would not agree that EBITDA is a trick to get a higher price. It is just a different multiple. What you need to understand is that buyers and sellers are (generally) sophisticated (the exception might be small private companies). So it is really not possible for bankers to “trick” a client because of the choice of multiple. The way M&A (and investment banking in general) really works is that buyers more or less know what they want to pay and bankers do valuations to justify that amount. It’s the company (buyer or seller) really driving the valuation, not the investment banker.

      As for your broader point/question. No aspect of the technical knowledge in investment banking is very difficult nor requires very high levels of intelligence. Having taught many junior bankers, and written a book on the technical skills of investment banking, I’d say you can teach (a reasonably intelligent human) all the technical skills in a week or two. Maybe not a long weekend as you mentioned (nor a dog), but not too much longer. But, it takes 9-12 months for the average junior banking to become competent. They have to learn other skills, notably the required attention to detail, presentation skills, formatting, etc. As for senior bankers, their’s is a sales job, not unlike a sales job in many other industries. Which is probably more personality (and drive) than skillset.

      Hope this help. – Andrew

      • Jim

        Thanks Andrew….Makes sense. Trick was wrong word just being a bit cynical! I read your book and was surprised how much I had absorbed over the years so I agree with you on the “Dog” bit LOL…Herbert Allen said it I didnt! Again, thanks for the reply. I will probably ask another question in the future!

        • Andrew

          Jim,
          Feel free to ask away. You (and everyone else) are certainly allowed to be cynical when it comes to investment banking or anything Wall Street related!

          • Jim

            The other questions I have are what metrics are the most important to screen for or look at. There seem to be a million ratios etc…which ones are the most important to use to give an idea if a company is an LBO or takeover target and if it is worth investigating further.
            Also…should you use the median EV/EBITDA multiple from recent deals as the multiple in a Break-up value calculation?
            If I am looking a a Value Line page or an S&P tearsheet is there enough information there to use for a quick valuation? They seem to be missing data to calculate EV etc.
            Finally….between EBIT and Net Income is Interest Expense and Taxes. If you use all EBIT for Interest you pay no taxes but you also will have nothing for principal repayment. Is there a shorthand calculation to give a rough idea as to how to get the most use out of EBIT? Right amount of Interest but still leaving enough to retire debt?
            Thanks again.
            I know I am asking some strange questions! It is he weekend maybe my dog has an idea too!!!! LOLOLOL

          • Andrew

            Jim,
            These questions are a lot harder for me to answer because they are really investing questions, not investment banking (and each would require their own blog post to answer). But very briefly, I don’t know what metrics would help you find LBO or takeover candidates. You can use median EV/EBITDA but to do a real valuation analysis you need to look deeper at the comps. Also, that wouldn’t really be a break-up valuation. Not sure what information is in Value Line or S&P. To calculate EV (at least an estimate) you need market cap, debt and cash. Not sure I understand your last question on EBIT and interest. Interest is an obligation so you have to have enough EBIT to cover interest (or risk bankruptcy). Same with principal repayment but keep in mind that most often there is the option to refinance debt that is maturing. Sorry if I’m not too helpful here.

  • Jim

    Thats Ok Thank You for trying! I appreciate it.

  • Jessica Williams

    Question – how much would you pay today, if I told you I would pay you $10 every year into perpetuity? I am guessing this depends on discount rate you assume – which is only your cost of equity = risk free rate + Beta*market risk premium, but then since it is cash and assuming there is no risk that the cash wont come then your Beta would be 0 and so your discount rate would be around 2-3%?

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