LBO & Paper LBO
In a simplified paper LBO, why is it often acceptable to assume EBITDA ≈ cash flow for debt paydown, and when is that dangerous?
Model answer
When the interviewer says 'assume D&A = capex and no working-capital change,' D&A is a non-cash add-back offset by capex, so FCF before financing ≈ EBITDA - interest - taxes. It's a fair…
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