Maximum Acquisition Leverage
Gentech is evaluating how large an acquisition it could purchase without raising additional equity capital. By modifying the assumed price, and the acquisition multiple, answer the questions below in the boxes provided.
Question 1: Using the assumptions below, determine the largest company, based on revenue, that Gentech can acquire without raising additional equity. Modify cell G4 in the Debt Capacity Mode worksheet, increasing size of acquisition, to determine the highest revenue size target that Gentech can acquire with debt alone.
Question 2: If the acquisition multiple rises to 8.0Xs EBITDA, determine the largest company based on revenue that Gentech can acquire without raising additional equity. Modify cell C21 below, and cell G4 in the Debt Capacity Model worksheet, increasing size of acquisition, to determine the highest revenue size target that Gentech can acquire with debt alone.
Attachment:- Deb_Capacity_Exercise.xls