Question One. A recent academic study finds that firms that have been acquired by private equity investors in a leveraged buyout (LBO) transaction on average have 40% smaller private jet fleets than similarly sized publicly traded firms in the same industry. Further, firms often sell some private jets shortly after being acquired by private equity investors. The private jets are used by employees (typically senior management) in lieu of commercial airline travel. For clarity, the following table is a hypothetical example. Firm Industry Annual Sales Ownership Private Jets ABC Corp Widget Manufacturing $300 Million Private Equity 6 XYZ Corp Widget Manufacturing $300 Million Public Equity 10 Explain why firms owned by private equity investors versus public equity investors own less private jets. Private Equity investors usually acquire firms via LBO that they believe are being mismanaged, not managed as efficiently as possible, have high agency costs, or operate in industries with high free cash flows and low capital investment opportunities. After the acquisition, the high level of