easy · Investment Banking ma-lbo
In a 'Dividend Recapitalization', a sponsor borrows money to pay itself a dividend.
How does this specifically impact the IRR of the investment?
- It decreases the IRR because the company now has more interest expense to pay
- It increases the IRR by accelerating the timing of cash inflows to the sponsor
- It increases the IRR by allowing the sponsor to write up the cost basis of its remaining equity
- It has no impact on IRR, only on the Multiple on Invested Capital (MOIC)
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