You are working for a private equity fund and you are responsible for a leveraged buyout of Sports Inc. This stock-listed company has equity with a market value of $100 million and debt with a face value of $20 million. The current EBITDA is $10 million so that the before-tax return on assets is 8.33% for the shareholders and debt holders of the target company. - . Your fund uses $170 millon to perform the LBO. The $170 million include $155 million in debt at a 5% coupon rate and $15 million in equity. The Sports Inc's debt is paid off at a face value of $20 million and its equity is bought for $150 million (including a 50% premium for the target company's equity holders). After the LBO, it is expected that the cash flows from operations (EBITDA) of Sports Inc. will increase by 5% pa. due to unlocking hidden business opportunities. After 8 years, your fund can own Sports Inc. free and clear of the debt ($155 million, which were used to finance the LBO). - Calculate the return of the LBO transaction and interpret your result! You are working for a private equity fund and you are responsible for a leveraged buyout of Sports Inc. This stock-listed company has equity with a market value of $100 million and debt with a face value of $20 million. The current EBITDA is $10 million so that the before-tax return on assets is 8.33% for the shareholders and debt holders of the target company. - . Your fund uses $170 millon to perform the LBO. The $170 million include $155 million in debt at a 5% coupon rate and $15 million in equity. The Sports Inc's debt is paid off at a face value of $20 million and its equity is bought for $150 million (including a 50% premium for the target company's equity holders). After the LBO, it is expected that the cash flows from operations (EBITDA) of Sports Inc. will increase by 5% pa. due to unlocking hidden business opportunities. After 8 years, your fund can own Sports Inc. free and clear of the debt ($155 million, which were used to finance the LBO). - Calculate the return of the LBO transaction and interpret your result