LBO & Paper LBO
Paper LBO with a quick FCF build: Entry EBITDA $200, 5.0x leverage @ 8% interest, entry & exit multiple 9x, EBITDA flat at $200, 25% tax rate, D&A = capex, no NWC change, 100% cash sweep, 5-year hold. Estimate IRR.
Model answer
Entry EV = 200 x 9 = $1,800. Debt = 5 x 200 = $1,000. Equity = $800. Annual interest ≈ 8% x 1,000 = $80 (approx, ignoring declining balance). EBT = 200 - 80 = 120; tax = 30; net income ≈ 90; with…
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