A leveraged buyout (LBO) occurs when an entrepreneur (or any employee group) uses borrowed funds to purchase an existing venture for cash. Most LBOs occur because the entrepreneur purchasing the venture believes he or she could __________.
A) Profit from a long-term capital gain to the seller
B) double taxation on the funds used to repay the money borrowed to acquire the company
C) run the company more efficiently than the current owners
D) a long-term capital gain to the seller and a short-term tax saving for the buyer
E) None of the answers are correct.
Correct Answer:
Verified
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