Private Equity

Exam 1: 2019/20 T3

Comprehensive exam-prep quiz on PE fund structure, PE return measures, LBO candidates, mezzanine financing, return decomposition, debt coverage, IRR, sweet equity, and sources-and-uses. Source:

Question 21 of 22

Calculate the required exit price for the PE fund to achieve a 3x return.

Use the following values:

EBITDA = €10M
FCF = €15M
Entry multiple = 5.0x EBITDA
Exit multiple = 5.0x EBITDA
Leverage = 3.0x EBITDA
50% of debt is paid down by exit
Fund return target = 3.0x
Sweet equity = 20% of total equity

Write your answer in your own words. It will be graded with Gemini.

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