medium · Investment Banking valuation-core

A company has $100 million in Net Operating Losses (NOLs). If the tax rate is 25% and the firm can use $20 million of NOLs per year, what is the impact on an LBO model's Debt Schedule?

1. It increases the interest rate that lenders charge.
2. It increases the cash available for optional debt repayment.
3. It is ignored because LBOs focus exclusively on EBITDA figures.
4. It reduces the Total Debt required to fund the leveraged buyout price.

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