hard · Investment Banking

A company has $100 million in Net Operating Losses (NOLs). In an LBO, how do these NOLs affect the IRR?

1. They have no impact because an LBO is a 'tax-free' transaction.
2. They increase IRR by reducing cash tax payments, thus increasing FCF available for debt repayment.
3. They increase IRR by increasing the company's EBITDA.
4. They decrease IRR because they increase the tax rate.

Sign up free to see the explanation and track your rank →