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Annual internal rate of return

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Grand Co. has an equity market value today of $965mm and $425mm in net debt. A private equity firm, BBM, decides to purchase Grand Co. at a 25% premium to the current stock price using a LBO structure. The capital structure that BBM uses is 38% equity, 62% debt. Assume that seven years later Grand Co. has paid off all the debt and its capital structure is 100% equity. BBM sells it for $2,900mm at that time. What was the annual internal rate of return that BBM earned on this investment?

Reference no: EM132743501

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