What was the annual internal rate of return

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Q1. 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%

Q2. Which of the following are considered to be important factors when assessing corporate governance strength?

I. Board composition and independence.

II. Director compensation.

III. The company's capital structure.

IV. Executive compensation.

A) I and IV only.

B) I, II and IV only.

C) I, II and III only.

D) I, II, III and IV.

Reference no: EM132795964

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