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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 20 of 22

In the exit multiple / IRR question from year 1 to year 5, why is the exponent 1/4 used in the IRR formula?

Pick one: press 1-4 on your keyboard or click an option.
A

Because the entry multiple is 8.0x and half is 4.0x

B

Because taxes are assumed for four years

C

Because there are four holding-period years from year 1 to year 5

D

Because EBITDA grows by 4%