Unlevered IRR is higher than levered IRR?
Is it possible for unlevered IRR be higher than levered IRR in an LBO? When/why would that be the case please? Thank you!
Is it possible for unlevered IRR be higher than levered IRR in an LBO? When/why would that be the case please? Thank you!
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If your unlevered IRR is lower than your cost of debt then the resulting levered equity IRR would be lower than the corresponding unlevered IRR.
Yes, negative leverage. As mentioned above, your cost of debt being higher than your returns would cause a lower levered IRR than unlevered IRR.
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