LBO & Paper LBO
Full paper LBO under time pressure: Entry EBITDA $50, entry multiple 8x, debt 4x EBITDA at 7%, EBITDA grows 5%/yr for 5 years, exit at 8x, 25% tax, D&A=capex, no NWC change, 100% cash sweep. Estimate MOIC and IRR.
Model answer
Entry EV = 50 x 8 = $400. Debt = 4 x 50 = $200; entry equity = $200. EBITDA path (5%/yr): 50→63.8 by yr5 (50 x 1.05^5 ≈ 63.8). FCF/yr ≈ EBITDA - interest - tax. Interest ≈ 7% x ~$170 avg ≈ $12/yr;…
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