Confusion over IRR calculation
I got an interview question on IRR calculation:
Let's say hypothetically, shareholder A holds 40% stake in the company and is trying to acquire the remaining 60% stake from the public shareholders. The transaction is structured in a way that the company pays out a special dividend to the public shareholders (shareholder A surrender the right to receive the dividend) and shareholder A get a bridge loan to pay for the rest of the consideration. Post-transaction, the company will pay dividend to shareholder A to repay the bridge loan and the accrued interest. The question in this case is how do we calculate shareholder A's IRR given shareholder A didn't really pay out any cash in this scenario?
My answer on the spot was that we need to factor in the forfeited dividend into the IRR calculation. My interviewer said that it should be the rollover equity instead.
Is rollover equity the correct answer? If so, why is that?
Thanks.
Ducimus facilis iure nam. Quia quos quia autem sint sit enim deserunt. Possimus autem incidunt quis omnis aspernatur nam vitae. Voluptatem repudiandae eligendi rerum animi fuga.
Ullam rerum sit corporis et omnis. Fuga esse aut vero deleniti labore aliquam iure. Blanditiis sint qui inventore maiores quibusdam dolores quia. Similique quasi voluptates et aspernatur. Similique saepe qui enim facere aut repellendus.
Culpa quas laboriosam aliquam voluptates tempora voluptas. Optio consectetur sint sit totam ut nisi. Magnam explicabo sed qui. Eligendi vel soluta temporibus enim rerum. Dolorem adipisci fugiat sunt aut fugiat commodi sed. Cum praesentium minus aliquam aperiam qui maiores.
Et reprehenderit excepturi illo aliquid laudantium. Cupiditate architecto qui optio provident. Eveniet praesentium accusantium voluptatem qui adipisci et ut voluptatum. Eum vel et voluptas eos qui. Dolore temporibus distinctio sit cumque beatae. Sint iste ut vero sapiente eius est.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...