Mgmt Options Pool Calculation in Basic LBO Model Example
Hello,
Can someone explain the theory behind the formula for cash out from mgmt options in the basic lbo model examples. The calculation is "new equity * [(mgmt %) / (1+mgmt%)]". Why do you need to divide by (1+mgmt%)?
TSM
The options were exercised and thus created more shares. The new number of total shares is captured by (1+mgmt%).
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