Corporate Development SA - Technicals?
what technicals would I have to know in particular, would they be exactly the same as banking valuation/etc questions?
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Is it possible to have a negative IRR if all your cash flows are positive?
yes, depends on your initial outlay
negative IRR? maybe if you have too high a purchase price (just guessing)
I would think so but I'm not completely sure. My reasoning goes:
If you buy a company at 1.5x leverage for $25 ($15 debt, $10 equity), and the cash flows are $1 each year for 5 years and you sell the company for a reduced price of $12 in the final year, $10 of which is used to pay down the debt (so $2 in the last cash flow), your IRR will be negative.
Put in: $10 Get back: $1+1+1+1+1+$2 = $7
Is this right, or am I overthinking it?
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