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XYZ Compony with earnings of $40M is bought for $120M, thus on an earnings multiple of 3. It is held for 5 years and then

XYZ Compony with earnings of $40M is bought for $120M, thus on an earnings multiple of 3. It is held for 5 years and then sold for $ 200M, by which time its earnings have increased to $50M, and so the exit earnings multiple is 4. The original purchase price is funded by $100M of debt and $20M of equity.

Analyze the Buyout Transaction above.

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