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Question 2 (21 marks) Please keep your answers coherent and brief. a. Private equity (PE) engages in investment by taking a company into private ownership
Question 2 (21 marks) Please keep your answers coherent and brief. a. Private equity (PE) engages in investment by taking a company into private ownership in order to restructure it and selling it in the future at a hoped-for profit. A common feature of PE operation is to use leverage when investing a company. Please explain the meaning of using leverage in PE operation and briefly explain why PEs prefer to use leverage instead of funding the investment fully by themselves. (4 marks)
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