medium · Investment Banking ma-lbo
A buyer structures a deal for SigmaTech with a $50M earnout payable if Year 2 revenue exceeds $100M. Management provides a base case of $110M (60% probability), a downside case of $95M (30% probability), and an upside case of $120M (10% probability).
What is the probability-weighted expected value of the earnout payment?
- $35M
- $50M
- $45M
- $33.3M
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