easy · Investment Banking valuation-core
During an LBO holding period, a private equity firm executes a 'Dividend Recapitalization' by borrowing an additional $200.0 million and paying it out to themselves.
What is the primary impact on the LBO returns?
- It increases the MOIC by increasing total cash received.
- It decreases risk by lowering the company's interest burden.
- It increases the IRR by returning capital to the sponsor earlier.
- It has no impact on returns because the Enterprise Value is unchanged.
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