easy · Private Equity & LBOs

In an LBO model, if PIK interest is capitalized, how does it affect the 'Equity Plug' s & Uses table at entry?

1. It reduces the purchase price of the target company.
2. It has no direct impact on the Sources & Uses table at entry.
3. It decreases the equity check because it is a source of financing.
4. It increases the required sponsor equity check because it is a closing cost.

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