In an LBO model walkthrough, what is the final step described?

In an LBO model walkthrough, what is the final step described?

• A. Exit assumptions and IRR
• B. Sensitivity Analysis
• C. Identifying Sources and Uses of Funds
• D. Complete projected 3-statement model

Answer: (B)

The final step in an LBO model walkthrough is performing sensitivity analysis. After building the financing structure, projecting the three-statement model, and calculating the base-case exit IRR, you test how the returns change when you tweak key inputs. By varying factors like the exit multiple, leverage, revenue growth, margins, and interest costs, you generate a spectrum of IRRs and equity returns. This step is essential to show the deal’s robustness and to reveal which assumptions drive value or risk, rather than relying on a single point estimate.

The final step in an LBO model walkthrough is performing sensitivity analysis. After building the financing structure, projecting the three-statement model, and calculating the base-case exit IRR, you test how the returns change when you tweak key inputs. By varying factors like the exit multiple, leverage, revenue growth, margins, and interest costs, you generate a spectrum of IRRs and equity returns. This step is essential to show the deal’s robustness and to reveal which assumptions drive value or risk, rather than relying on a single point estimate.