medium · Private Equity advanced-lbo

In a 'Paper LBO' interview context, if you are told there is a $10.0M cash shortfall at close, what is the fastest way to account for it when estimating the Year 5 Exit Equity value?

1. Add $10.0M to the entry debt and estimate Year 5 debt paydown starting from that higher base
2. Subtract the full $10.0M shortfall directly from the projected Year 5 exit enterprise value
3. Ignore it entirely, since $10.0M is typically immaterial relative to a large deal's size
4. Simply reduce the assumed entry purchase multiple by roughly 0.1x to offset it

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