medium · Principles of Finance capital-budgeting
A sponsor acquires a company for $1,000M (10x EBITDA) using $600M of debt and $400M of equity. After 5 years, EBITDA has grown to $150M, debt has been paid down to $400M, and the firm is sold at the same 10x multiple.
What is the sponsor's IRR?
- 22.42%
- 30.26%
- 15.00%
- 18.50%
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