LBO & Paper LBO
Paper LBO: Entry EBITDA $100, entry multiple 10x, 6x leverage, no debt paydown, EBITDA grows to $130 at exit, exit multiple 10x, 5-year hold. Compute MOIC and IRR.
Model answer
Entry EV = 100 x 10 = $1,000. Debt = 6 x 100 = $600. Entry equity = 1,000 - 600 = $400. Exit EV = 130 x 10 = $1,300. With no debt paydown, net debt at exit = $600. Exit equity = 1,300 - 600 = $700.…
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