Question

Which of the following is NOT a disadvantage of performing an LBO analysis? a) Value obtained...

Which of the following is NOT a disadvantage of performing an LBO analysis?

a) Value obtained is sensitive to projections and aggressiveness of operating assumptions

b)Stand-alone LBO may overestimate strategic sale value by ignoring synergies with acquirer

c)Only meaningful for companies which could operate under high financial leverage

d)Sales growth rate, margins, and discount rates are key to valuation

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Answer #1

Leveraged buyout analysis will be helping in analysis of sales growth rate and margin and discount rates so it is a highly analytical method for companies in order to analyse the growth rate in the sales along with margins and discount rates so it will be dynamic in nature and it is not a disadvantage.

Value obtained is sensitive and stand-alone leveraged buyout is ignoring synergies as well as it is just meaningful for company with high leverage are the disadvantages of leveraged buyout.

Correct answer will be option (d) Sales growth rate, Margins and discount rate of equation.

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