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The company StaCo has an equity market value today of $3,542mm and $1,982mm in net debt. A private equity firm, BBM, decides to purchase StaCo
The company StaCo has an equity market value today of $3,542mm and $1,982mm in net debt. A private equity firm, BBM, decides to purchase StaCo at a 30% premium to the current stock price using a LBO structure. The capital structure that BBM uses is 35% equity, 65% debt. Assume that seven years later StaCo has paid off all the debt and its capital structure is 100% equity. BBM sells it for $12,000mm at that time. What was the annual internal rate of return that BBM earned on this investment? A) 521%. B) 33%. C) 27%. D) 25%.
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