. A private equity firm XYZ performs a leveraged buyout in which they purchase all equity and debt of company ABC for $5 billion. XYZ finances this purchase with $1 billion of their own capital and borrows the remaining $4 billion at 20% interest. In

one year (unusually short for LBO), XYZ pays off the debt and sells ABC for $7.5 billion. Which of the follow is closest to XYZs return on their invested capital (the $1 billion)? Hint: draw a balance sheet.

(a) 200% (b) 300% (c) 250% (d) 350%

(e) 50%