the private equity firm kevin's parnters is looking fat a leveraged buyout opportunity on the wendy's chain . wendy's today has a capital structure of 75% equity, 25% debt its free cashflow last year was $1 million and it is expected to grow at a cnstan rate of 8% per year all f it assets are operating assets. its WACC equals 14% . if kevin invest in the deal (it would acquire 100% of the company) it plans to exit at the end of year 5, at which point wendy's capital structure will be 90% equity and only 10% debt and its enterprise vallue will be estomated at 20 times its fcf in year 5 all interim cash flows wil be used to pay down debt . kevin has a 35% minimum IRR hurdle rate 1. what is wendy's value of equity today? 2. what wil be wendy's value of equity at the end of year 5
the private equity firm kevin's parnters is looking fat a leveraged buyout opportunity on the wendy's chain . wendy's today has a capital structure of 75% equity, 25% debt its free cashflow last year was $1 million and it is expected to grow at a cnstan rate of 8% per year all f it assets are operating assets. its WACC equals 14% . if kevin invest in the deal (it would acquire 100% of the company) it plans to exit at the end of year 5, at which point wendy's capital structure will be 90% equity and only 10% debt and its enterprise vallue will be estomated at 20 times its fcf in year 5 all interim cash flows wil be used to pay down debt . kevin has a 35% minimum
1. what is wendy's value of equity today?
2. what wil be wendy's value of equity at the end of year 5
3. how much equity should kevin invest today if its to meet exactly its hurdle rate
4. how mch debt should kevin contract in addition to its equity
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