Private Equity & Exit Opps
Same company, two structures: EV $1,000 (EBITDA $100 at 10x), bought with either 4.0x or 6.0x of debt. Assume FCF after interest just covers reinvestment, so debt stays constant. Compare returns if exit EV is $1,200 — and if it's $800.
Model answer
Structure A (4.0x): debt 400, equity 600. Structure B (6.0x): debt 600, equity 400. Upside exit ($1,200): A equity = 1,200 − 400 = 800 → 800/600 ≈ 1.33x (~6% IRR over 5 years); B equity = 1,200 − 600…
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