You are the chief investment officer (CIO) for a private equity firm that is considering the acquisition of an industrial company. Using the following information and assumptions please answer the 2 questions below. Your answers must be provided in the short answer box below. These numbers should match the supporting calculations to be counted towards your final score.

LBO Problem Assumptions		Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
EBITDA		40,000.00	41,000.00	45,100.00	49,610.00	54,571.00	60,028.10
Depreciation			(16,400.00)	(18,040.00)	(19,844.00)	(21,828.40)	(24,011.24)
EBIT			24,600.00	27,060.00	29,766.00	32,742.60	36,016.86
CapEx			(13,500.00)	(13,500.00)	(13,500.00)	(13,500.00)	(13,500.00)
Working capital investment			(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)	(2,000.00)
Debt as a % of EV	60%
Interest Rate on Debt	6%
EV/EBITDA Entry Multiple	6.0x
EV/EBITDA Exit Multiple (yr. 5)	6.0x
Tax rate	35%

Assumptions:

• The firm can be purchased for 6x the firms current EBITDA of $40 million and resold in five years for an exit multiple of 6x.
• The deal will be financed with 60% of the purchase price using debt that carries a 6% interest rate. The debt will require a cash sweep so that all available cash flow will go toward the repayment of the note.
• A tax rate of 35% is assumed in all calculations.
• Capex will be $13.5 million per year; net working capital investment per year is $2 million.
• The company does not carry any excess cash and has no non-operating assets.

Questions:

1. What is the IRR?
2. What is the MOIC?