Use the chart below to answer questions 23-25.

1 2 3 4

Revenues 700 750 800 900

COGS 380 425 460 530

SG&A 100 110 120 125

Depreciation 50 50 50 50

Operating Income 170 165 170 195

An equity sponsor is looking to buy the above company at the end of year 1 for a 7x multiple. The equity sponsor will put in $1,100 of equity.

23. How much debt is needed to finance this acquisition?

24. Calculate interest coverage at the end of year one given the new debt which was raised. In other words, use your answer from #20 to calculate this ratio.

25. Assume the company is sold at the end of year 4 for the same 7x multiple. What is the equity return assuming no debt is paid down?