Acme Industries, Inc. is a family business founded by Wyle E. Coyote. Acme had $20 million in
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Acme Industries, Inc. is a family business founded by Wyle E. Coyote. Acme had $20 million in EBITDA last year and no debt. Businesses of this size are currently valued at 4.5x. Mr. Coyote wants to unlock some of his enterprise value by doing an equity recap. He wants to take out as much cash as possible while retaining 35% ownership in his company. The current credit markets will tolerate senior debt of 2.5x and 1.5x of mezzanine debt. The mezzanine lenders demand warrants that would represent a 5% equity stake. A private equity group called PEG Capital has agreed to do the deal.
How much cash will Mr. Coyote receive in this deal while retaining 35% of his company?
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Expert Answer:
Mr Coyote can receive while retaining 35 of his company Calculation of the total value of the compan... View the full answer
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