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Sources & Uses of Funds STEP 11

In building our model, we want the flexibility to consider a number of possible financing scenarios. As you can see below, we have set up six such scenarios that contemplate two possible refinancing scenarios, three LBO scenarios, and one case in which no transaction occurs at all. In each scenario the sources of funds must equal the uses of funds. To the right of these cases is the active case, set above in our main inputs and assumptions block.

Perhaps the most confusing calculations in this section are those that calculate capitalized financing costs. Although these costs are capitalized and amortized over some period of time for accounting purposes, the cash outlays for these costs are paid up-front when the transaction closes. They are, therefore, uses of funds. For each scenario (except the no-deal case), we assume a revolver of a fixed size so that, in each scenario, there will be the same fee associated with the revolver. Parameters used to calculate other fees and expenses (e.g. principal amounts), however, vary from case to case. In the second parts of these equations, we are simply multiplying the principal amounts for each case by the fee percentages applicable in all cases. For example, a 2% fee on a $100 loan equals $2.

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