medium · Investment Banking valuation-core
An LBO model shows a 5-year IRR of 18%. The sponsor wants to reach a 20% IRR target.
Which of the following changes, held in isolation, would most likely achieve this?
- Increasing the capital expenditure (Capex) budget for the company.
- Extending the holding period from 5 years to 7 years.
- Reducing the amount of leverage used in the transaction.
- Lowering the entry purchase price multiple by 0.5x.
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