Grand Co. has an equity market value today of $965mm and $425mm in net debt. A private equity firm, BBM, decides to purchase Grand Co. at a 25% premium to the current stock price using a LBO structure. The capital structure that BBM uses is 38% equity, 62% debt. Assume that seven years later Grand Co. has paid off all the debt and its capital structure is 100% equity. BBM sells it for $2,900mm at that time. What was the annual internal rate of return that BBM earned on this investment?

A) 20.6%
B) 23.9%
C) 24.7%
D) 27.2%

Answer rating: 100% (QA)

1A 205 Debt 425000000 Equity 965000 0000 Total capital 1390000000 percentage composition of equity ... View the full answer