Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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.

image text in transcribed
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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Financial Management

Authors: Eugene F Brigham, Phillip R Daves

9th Edition

032431986X, 9780324319866

More Books

Students also viewed these Finance questions

Question

=+5. How they might use the product (usage effect).

Answered: 1 week ago