Prof. Ian Giddy, New York University
You have been asked to estimate the rate of return to investors in a leveraged buyout. The key calculation is the exit valuation. You will base the exit valuation on the concept "Equity=Enterprise Value - Net Debt"
You will assume exit enterprise value is performed at a multiple of EBITDA which equals the entry valuation.
The facts are as follows:
1. What is the exit equity value?
2. What internal rate of return can sponsors expect? And management?