Guggenheim IB Interview Questions

A dividend recap is when a PE-owned company raises new debt specifically to pay a cash dividend to its sponsor, allowing the sponsor to de-risk and accelerate returns without selling the company, typically used after significant deleveraging or in favorable credit markets.

EV/NI is inconsistent — Enterprise Value represents all capital providers (equity + debt), but Net Income is available only to equity holders (post-interest), so the correct pairing is Equity Value/NI (the P/E ratio).

The transaction will be less dilutive at a P/E of 15x because the higher share price means fewer new shares are issued to acquire the target, resulting in less EPS dilution for existing shareholders.

Because value creation in PE comes from multiple independent levers—the acquiring firm sees untapped upside through a different thesis (e.g., buy-and-build, re-leveraging, or sector expertise) applied to a de-risked, professionalized platform.

The bond is the better investment: its current yield alone matches the stock's 10% return, and the built-in $20 capital gain to par pushes total return above 10%, all while carrying lower risk as senior capital structure.

Beta measures a stock's sensitivity to overall market movements—its systematic risk—and is calculated as the covariance of the stock's returns with the market's returns divided by the variance of the market's returns.

Amazon is probably more valuable mostly together, but I'd nuance it by segment. Retail, third-party marketplace, Prime, fulfillment, and advertising have strong operating synergies, so separating those would likely destroy value. AWS is the most separable business and could arguably command a higher standalone multiple, but at the total-company level I'd still lean that Amazon is worth at least as much, and likely more, as a combined platform because the retail/Prime/ads flywheel is real. The best counterpoint is that better segment disclosure—especially around advertising and retail profitability—could unlock value without a breakup.

Net income rises $80 and cash is flat. On the income statement, $200 of revenue less the $100 of inventory cost gives $100 of pretax income, and a 20% tax rate leaves $80 of net income. On the cash flow statement, start with that $80, add the $100 released as inventory leaves the balance sheet, subtract the $200 the customer still owes, and add the $20 of tax accrued but not yet paid in cash. It nets to zero.

Gross revenue retention measures the percentage of beginning ARR retained after churn and downgrades (capped at 100%), while net revenue retention also adds back expansion revenue from existing customers, allowing it to exceed 100%.

I'd recommend a senior secured Term Loan B as the primary tranche for its low cost and covenant-lite flexibility, supplemented by a revolver for liquidity, and layering in high-yield notes or mezzanine debt for incremental leverage as needed.

No income statement impact; on the balance sheet, cash decreases by $100 and inventory increases by $100; on the cash flow statement, the $100 inventory increase is a working-capital use of cash, reducing cash from operations by $100.

The tax rate is 50%, derived by finding Net Income ($30) from P/E, EBITDA ($100) from EV/EBITDA, EBIT ($70) after D&A, EBT ($60) after interest expense ($10), then solving 30 = 60 × (1 − t).