easy · Investment Banking ma-lbo
When calculating the 'Exit Value' in an LBO analysis, why is it common to assume the exit multiple is equal to the entry multiple?
- Multiples and growth rates are mathematically linked to stay constant
- It ensures the IRR is always exactly 20%
- Accounting rules require multiples to stay constant over the holding period
- It provides a conservative 'base case' that doesn't rely on market timing
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