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A SMALL AIRLINE RECENTLY SOLD TO A PRIVATE EQUITY GROUP FOR $145 MILLION.

A SMALL AIRLINE RECENTLY SOLD TO A PRIVATE EQUITY GROUP FOR $145 MILLION.

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Author: Christine Farr
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http://theperfecthomework.com/a-small-airline-recently-sold-to-a-private-equity-group-for-145-million/

A small airline recently sold to a private equity group for $145 million. The airline has earned profits of $9 million last year. The new managers believe they can grow profits at 5% per year. The private equity group borrows money from wealthy individuals to invest in acquisitions. Because of the significant risk involved, lenders are promised a 12% return on their loans to the equity group. Is the purchase price of the new airline reasonable? Explain


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