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!

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3 Comments

TO_excelguy

IB

7y

Most Helpful

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.

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Authored by: Certified Investment Banking Professional - 2nd Year AssociateCertified Investment Banking Pro

Pug

O

7y

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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JustADude

PE

7y

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Unlevered IRR is higher than levered IRR?

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Unlevered IRR is higher than levered IRR?

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