Lobby Ltd is the target of an LBO. It has EBITDA of $150 million. A private equity group buys Lobby at 4 times EBITDA. The purchase is financed by $320 million debt and the remaining is equity investment by the private equity group. Five years later, EBITDA has grow to $175 million. The private equity group sells Lobby at 5 times EBITDA to a competitor. At the time of the sale, the firm still has $320 debt outstanding. Assume cash balance is negligible.
1) What is the value of equity at exit?
A) 175M
B) 555M
C 280M
2. What is the
A) 7.84%
B) 98.2%
C) 14.7%
3) The positive IRR was due to
A) Debt amortization and multiple expansion
B) Improvement in operating performance and multiple expansion
C) Improvement in operating performance, multiple epxansion, and debt amortization
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