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Leveraged Buyouts: A Practical Introductory Guide to LBOs by David Pilger

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Chapter 15: Sensitivity Analysis

Sensitivity analyses are generally created to evaluate the degree to which outcomes would change if an input were changed. This sort of analysis is very common in discounted cash flow analysis whereby a sensitivity analysis is created to measure how much the valuation of a company changes given different discount rates or changing exit EBITDA multiples. The ability to create insightful sensitivity analyses is a valuable skill in financial analysis and modeling. Let’s build our own sensitivity analysis for the target company now. We will want to see how returns (IRR) are affected with changes in the amount of equity that is invested in the transaction as well as how exit EBITDA multiples affect returns.

“Being ...

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