Question 10

Pinder Co is planning on a leveraged buyout of Value Co. Pinder Co believes that by increasing the capital expenditures in years 3 to 5 to 7% of sales, it could raise the exit multiple to 10 times EBITDA. What is the percentage point improvement in Pinder Cos IRR?

(Round to the nearest two digits and choose an answer within 3 basis points. Assume that all other conditions of the buyout are identical to the assumptions in the lecture. The IRR prior to making changes should be 19.7%. Also, note that this question is asking for a percentage point improvement. For example, a change from 19.7% to 20.7% is an improvement of 1%.)

Group of answer choices

None of the other answers are correct.

9.56%

8.32%

6.73%

7.22%