LBO & Paper LBO
Estimate IRR for a 2.5x MOIC over a 4-year hold, in your head.
Model answer
IRR = 2.5^(1/4) - 1. 2.5^(1/4) = sqrt(sqrt(2.5)). sqrt(2.5) ≈ 1.58; sqrt(1.58) ≈ 1.257. So IRR ≈ 25.7%,…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from LBO & Paper LBO
- What is a leveraged buyout?
- What makes a company a good LBO candidate?
- What drives returns in an LBO?
- Why does using more leverage increase equity returns (when it works)?
- At a high level, how do you calculate the IRR or money multiple on an LBO?
- Name the three primary value-creation (returns) drivers in an LBO.