You are interested to acquire the following private equity firm. The private firm operates in Australia and its main business is in biotechnology. The current revenue is $7,400,000 per year. The companys projection is that it would grow 5% every year over the next five years. You would fund your purchase 55% debt and the remaining with equity. As a seasoned private equity investor, you would pay an EBITDA multiple of 10 for the company.

Based on the information provided by the firm, they have been generating an EBITDA margin of 20% before the COVID-19 pandemic. You will used EBITDA margin of 20% for your calculations. By actively managing the company, you would be able to grow the EBITDA margin by 2% for each of the next five years.

The initial fees and expenses associated with the acquisition are $2,600,000. You have an exit strategy of five years and would sell the company after five years at the same EBITDA multiple as above (10). Assume that interest rate is 5%, the yearly capital expenditure is $1,300,000 and the tax rate is 30%.

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Question

Show your operating projections over the next five years and the profit projection in year 5 if you acquire the firm using leverage buyout. If possible, briefly explain and discuss your numbers.