A Leveraged Buyout Refers To

question 16

Multiple Choice

A leveraged buyout refers to:

• A)a firm restructuring itself by selling off unrelated units of the company's portfolio
• B)a firm pursuing its core competencies by seeking to build a top management team that comes from a similar background
• C)a restructuring action whereby the managers of a firm, its employees and/or an external party buy all of the assets of a business, financed largely with debt, and take the firm private
• D)an action where the management of a firm and/or an external party buy all of the assets of a business, financed largely with equity

---

Definitions:

WACC

This calculation, known as the Weighted Average Cost of Capital, quantifies a company's cost of capital by proportionately weighting each type of capital it uses.

WACC

The Weighted Average Cost of Capital identifies the cost of a company's capital by weighting each capital category in proportion to its significance.

NPV

Net Present Value, a method used to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows.

IRR

Internal Rate of Return; the discount rate that makes the net present value of all cash flows from a particular project equal to zero.