The assumptions above represented Buyouts Vs best estimate of the Companys performance

given its current understanding of the Company and the apparel industry; however, the partners

recognized that circumstances can and do change over the course of a multi-year investment. As

such, Buyouts V wanted to analyze how sensitive its returns were to changes in EBITDA growth

rate, exit multiple, and beginning financial leverage.

Required:

A: Holding the purchase price calculated in the previous Question constant, calculate Buyout 5s multiple of investment and IRR given each of the following changes independently:

EBITDA growth of 7.5%

EBITDA growth of 17.5%

Exit multiple of 5.0x

Exit multiple of 7.0x

2.5x senior debt and 2.0x subordinated debt

1.5x senior debt and 1.0x subordinated debt

B: Based on the ranges used in Question A, to which variable is the IRR the most sensitive? How might Buyouts V use this knowledge to its benefit?