A private equity firm is guaranteed to receive 80% of the residual value of a leveraged buyout investment, with the remaining 20% owing to management. The initial investment is $500 million, and the deal is financed with 70% debt and 30% equity. The projected EBITDA multiple is 3.0. The equity component consists of:

• $120 million preference shares.
• $25 million private equity firm equity.
• $5 million management equity.

At exit in 5 years, EBITDA is expected to be $400 million, the value of debt is $150 million and the value of preference shares is $300 million.

Calculate

(i) The payoff multiple (cash-on-cash return) for the private equity firm and for management, respectively

(ii) The IRR (compound annual rate of return) of the PE firm