medium · Principles of Finance capital-budgeting
How does the 'Cash Sweep' in an LBO typically treat capital expenditures?
- CapEx is ignored entirely because it is classified as an investing activity, not an operating one
- CapEx is subtracted from operating cash flow before determining the cash available for debt repayment
- CapEx is added back to Net Income as if it were a non-cash source of funds available to lenders
- CapEx is funded entirely by issuing new equity each period so that all internal cash can go toward debt repayment
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