hard · Investment Banking

When calculating the 'Exit Value' in an LBO analysis, why is it common to assume the exit multiple is equal to the entry multiple?

1. Multiples and growth rates are mathematically linked to stay constant
2. It ensures the IRR is always exactly 20%
3. Accounting rules require multiples to stay constant over the holding period
4. It provides a conservative 'base case' that doesn't rely on market timing

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