Answered

Welcome to Westonci.ca, the ultimate question and answer platform. Get expert answers to your questions quickly and accurately. Join our Q&A platform and connect with professionals ready to provide precise answers to your questions in various areas. Experience the ease of finding precise answers to your questions from a knowledgeable community of experts.

The private equity firm Clarence Partners is looking at a leveraged buyout
opportunity on the Longo Trattoria restaurant chain. Longo today (Year O) has a
capital structure of 75% equity, 25% debt. Its free cash flow last year (FCFO) was
$1 Million and it is expected to grow at constant rate of 8% per year. All its assets
are operating assets. Its WACC equals 14%. If Clarence invests in the deal (it
would acquire 100% of the company), it plans to exit at the end of Year 5, at
which point Longo's capital structure will be 90% equity and only 10% debt, and
its enterprise value (EV) will be estimated at 20 times its FCF in Year 5 (FCF5). All
interim cash flows will be used to pay down debt. Clarence has a minimum 35%
IRR hurdle rate.
1. What is Longo's value of equity today?
2. What will be Longo's value of equity at the end of Year 5?
3. How much equity should Clarence invest today if it is to meet exactly its
hurdle rate?
4. How much debt should Clarence contract, in addition to its equity
investment, in order to close the deal with Longo today?

Sagot :

alouissaint12

Answer:

I dont know

Explanation:

Just want the points

Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. We appreciate your time. Please revisit us for more reliable answers to any questions you may have. We're glad you chose Westonci.ca. Revisit us for updated answers from our knowledgeable team.