Reference no: EM132729606

Problem 1. Advantages to private equity for LBO's include all of the following except:

a. LBOs eliminate those pesky shareholders, who, because of their q-t-q needs, fail to see the big picture or the long term.

b. LBOs can lower WACC by eliminating costly equity.

c. Over time, debt is lowered or eliminated through cash flows from the acquired firm.

d. Usually the assets are left "as-is" and can be used as equity claw-backs later.

e. Because private equity use of near-100% leverage, returns to private equity investors are very high and worth the added risk of leverage.

Problem 2. What is a "split-up" plan?

a. It is when private equity tenders all outstanding shares of the target company and allocates the purchased shares among the private equity investors.

b. It is the act of "repackaging" a target company and then brought public again through a new IPO.

c. A plan to employ leverage to buy and dismantle a larger competitor.

d. A plan whereby management and/or employees secure financing and buy out existing shareholders.

e. It is a plan to divest company divisions and/or subsidiaries because the separate businesses of a company are received to be worth more than the corporation as a whole.