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You are considering buying a company using leveraged buyout. The company is projected to have sales of 200 million in the first year after buyout.
You are considering buying a company using leveraged buyout. The company is projected to have sales of 200 million in the first year after buyout. The cost of sales and other administrative expenses are 50% of the sale. Depreciation and amortization are 10% of the sale. Tax rate is 40%. There is no change in net working capital and no capital expenditure that you can foresee. You plan to borrow 750 million at interest rate of 6% per year and put 70 million of your own money as equity to buy the company. The Price-to-sales multiple that you paying for this company is The Price-to-EBITDA multiple that you paying for this company is The net income of the company in the first year after buyout is million. The cash flows generated in the first year is million. Assuming all the cash flows are used to pay down debt after the first year, the interest expense in the second year is million
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