1. In a traditional LBO analysis, it is common practice to assume:
a. An exit multiple greater than the entry multiple
b. A dividend recapitalization strategy in year 5
c. An exit multiple equal to or below the entry multple
d. Paying off all of the debt prior to the exit
2. Under what circumstances might a strategic buyer use LBO analysis?
a. To determine the debt capacity of their company.
b. Strategic buyers would not use LBO analysis
c. To determine the price a financial sponsor bidder can afford to pay when competing for an asset in an auction process
d. To help spread comparable companies a
3. What are the key variables for sensitivity analysis performed in LBO analysis?
I. Purchase Price
II. Financing structure
III. Entry multiple
IV. Exit multiple
a. I and II
b. II and III
c. I, II and IV
d. I, II, III and IV