easy · Private Equity paper-lbo
What is the primary difference between PIK (Pay-in-Kind) interest and standard cash interest in an LBO model?
- PIK interest is not tax-deductible because it is non-cash.
- PIK interest reduces the Enterprise Value at exit more than cash interest.
- PIK interest is only found in senior bank debt facilities.
- PIK interest increases the principal balance rather than being paid in cash.
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