The Intent of the Owners in a Leveraged Buyout May

question 87

True/False

The intent of the owners in a leveraged buyout may be to increase the efficiency of the bought-out firm and resell it in five to eight years.This tends to make the managers of the bought-out firm high-risk takers,since they will probably not survive the resale.

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Definitions:

Unlevered Cost

the cost of a project or investment without considering the financing aspect, such as interest expenses on debt.

Unlevered Cost

The cost of capital or investment that does not consider the effects of debt financing, reflecting the cost of equity alone.

Bonds Outstanding

Refers to all the bonds issued by a company that are still in circulation and have not yet been redeemed.

Tax Rate

The cut of profits or earnings that governmental entities subtract as tax from companies or persons.