A private equity firm is completing a leveraged buyout (LBO) of ABC. ABC has projected EBITDA for next year to be $100 million and the growth rate of EBITDA will stay constant at 5% per year. An analyst at the private equity firm has determined that the purchase price for ABC is 7.5x leading EBITDA and the debt capacity is 5 leading EBITDA. Any remaining contribution to the purchase price will be in the form of equity provided by the LBO sponsor, i.e. the private equity firm. The private equity firm will exit at time t = 5 with ABC's value at the same 7.5x leading EBITDA multiple and the debt level will be 10 percent of its value at time t = 0. Calculate the IRR of the private equity firm's investment. Assume that all cash flows were used to pay off debt and that no distribution was made to equity.

Group of answer choices

22.6%

26.1%

23.8%

20.5%

29.4%