Imagine Acme Private Equity is considering the acquisition of Widget Corp in a leveraged buyout $($LBO$).$ The LBO model for Widget Corp forecasts the following cash flows for the first three years post$-$acquisition: Year $1$: $$50$ million, Year $2$: $$60$ million, Year $3$: $$70$ million. Acme has negotiated a debt package that includes a term loan of $$300$ million at an interest rate of $7\%$ annually with a $7-$year term. The term loan agreement includes a cash sweep provision equal to $100\%$ of excess cash starting in Year $1.$

A:Given this scenario, how would the inclusion of a cash sweep mechanism affect Widget Corps ability to repay its term loan under the terms of the debt package, assuming all available cash flow after interest payments is used to repay the debt?

B:The cash sweep mechanism would have no impact on the loan's tenure or interest expenses, as the cash flows are insufficient to cover the annual interest expense.

C:The cash sweep would increase the company's liquidity risks by forcing it to use all available cash to repay debt, potentially neglecting necessary investments in growth or operations.

D:The cash sweep would only apply in the event of a default, thus having no impact on the repayment schedule unless Widget Corp fails to meet its financial obligations.

The cash sweep would significantly decrease the loan's tenure by allowing Widget Corp to repay its debt faster, reducing interest expenses over the life of the loan.