You purchase a company with $100 EBITDA at a 10x multiple and 5x leverage. Over 5 years you pay down 50% of the debt. If you exit at 10x and want a 20% IRR, what does EBITDA have to be at exit?

Question

IBPrep · Accepted Answer

Purchase price: $100 x 10 = $1,000.

Debt (leverage): $100 x 5 = $500.

You purchase a company with $100 EBITDA at a 10x multiple and 5x leverage. Over 5 years you pay down 50% of the debt. If you exit at 10x and want a 20% IRR, what does EBITDA have to be at exit?

Answer

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