A company with $200 of EBITDA is bought at 6x using 50% debt. In 3 years it is sold at $300 of EBITDA and 6x. If all free cash flow pays down debt, approximately what is the IRR?

Question

IBPrep · Accepted Answer

Setup: purchase = $200 x 6 = $1,200, so debt = $600 and equity = $600. Exit TEV = $300 x 6 = $1,800.

A company with $200 of EBITDA is bought at 6x using 50% debt. In 3 years it is sold at $300 of EBITDA and 6x. If all free cash flow pays down debt, approximately what is the IRR?

Answer

More LBO interview questions

A company with $200 of