You are an analyst at a private equity firm. You have been tasked with analyzing a leveraged buyout opportunity of a ret

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You are an analyst at a private equity firm. You have been
tasked with analyzing a leveraged buyout opportunity of a retail
company.
Key Assumptions:
o The fund expects to hold the company for five
years.
o Comparable analysis puts the company value at
5xEBITDA
o We have been able to negotiate a Term A loan
at 3.5x LTM EBITDA (10% interest rate)
o We have been able to negotiate a high-yield
loan for 0.5x LTM EBITDA at a 15% interest rate.
o Transaction fees are assumed to be 0.5% of
the purchase price.
Company Assumptions:
• The company has
an LTM EBITDA of $10 million.
• Management
expects the company’s EBITDA to grow at 5% per year
• The company has
250k of net debt on its balance sheet.
• The company has
a $40 million asset that will be evenly depreciated over 10
years.
• The company
will maintain CAPEX spend at $1.1 million per year and will be
depreciated over 10 years.
• The company’s
working capital is projected at 15 days off of EBITDA
• The tax rate is
40%
Show your work done and answer the following
questions:
a) what is the
purchase price of this firm?
b) what is the equity
amount used to purchase this firm?
c) what is the
D&A of year 3?
d) what is the
changes in WC of year 4?
e) what is the EBIT
of year 5?
f) what is the
grand total UFCF of the firm?
g) what is the amount
of interest after tax of high yield loan?
h) what is the final
debt of the firm?
i) what
is the net exit equity value the firm?
j) What is the
expected IRR of the firm?