9. RedStone Investors acquired Kent Manufacturing through an equity buyout. It expects to recapitalize Kent in exactly three years when it believes the commercial banking industry will have recovered from the current recession. RedStone paid $1 billion for Kent representing 8 EBITDA. Assume Kent's EBITDA will grow 10% per year for 7 years at which time RedStone will be able to sell Kent for 12x EBITDA. Assume also that Kent will recapitalize at the end of year 3 by borrowing $800 million and paying it to RedStone as a dividend. What is RedStone's equity IRR on its investment in Kent Manufacturing? [Hint: calculate the equity cash flows at time 0 , time 3 , and time 7 ; the equity cash flows at times 1,2,4,5, and 6 are all zeroes; solve for the IRR of the cash flow stream.]