LBO & Paper LBO
Entry at 100 EBITDA, 10x, 70% debt (700 debt / 300 equity). Over 5 years FCF repays 300 of debt; EBITDA flat at 100; exit multiple flat at 10x. What's the MOIC and IRR, and what drove it?
Model answer
Exit EV = 100 × 10 = 1,000 (unchanged). Exit net debt = 700 − 300 = 400. Exit equity = 1,000 − 400 = 600. MOIC = 600 / 300 = 2.0x. IRR ≈ 2.0^(1/5) − 1 ≈ 14.9%. The entire return comes from debt…
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