Anatomy of a Leveraged Buyout - NYU Stern School of Business
Anatomy of a Leveraged Buyout - NYU Stern School of Business
Anatomy of a Leveraged Buyout - NYU Stern School of Business
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A basic proposition about debt and value<br />
For debt to affect value, there have to be tangible benefits and costs associated<br />
with using debt instead <strong>of</strong> equity.<br />
• If the benefits exceed the costs, there will be a gain in value to equity investors<br />
from the use <strong>of</strong> debt.<br />
• If the benefits exactly <strong>of</strong>fset the costs, debt will not affect value<br />
• If the benefits are less than the costs, increasing debt will lower value<br />
Aswath Damodaran 8
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