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# In a leveraged buyout, investors borrow huge sums of money

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09 Sep 2004, 19:25
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In a leveraged buyout, investors borrow huge sums of money to buy companies, hoping to pay off the debt by using the company's earnings and to profit richly by the later resale of the companies or their division.

A) by using the company's earnings and to profit
B) by using the companies' earnings and by profiting
C) using the companies' earnings and profiting
D) with the company's earnings, profiting
E) with the companies' earnings and to profit
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09 Sep 2004, 20:21
Paul wrote:
In a leveraged buyout, investors borrow huge sums of money to buy companies, hoping to pay off the debt by using the company's earnings and to profit richly by the later resale of the companies or their division.

A) by using the company's earnings and to profit
B) by using the companies' earnings and by profiting
C) using the companies' earnings and profiting
D) with the company's earnings, profiting
E) with the companies' earnings and to profit

First hint: mixed use of company and companies. Gotta make up your mind!

Second hint: LBO investors usually wait till they have paid off their debts using the earnings of the companies. Otherwise, there's no point of a buyout. (Granted, this hint will only be apparent to the finance folks.)

(B) is incorrect because you don't need to pay off your LBO debt by profiting richly. (C) introduces a qualifying present participle within a qualifying present participle (hoping...using...profiting). Similar problem with (D) which also forgets the conjunction AND.

(E) is the most concise of them all: hoping to pay off the debt ... and to profit richly. (It can lose the second to before profit though.)
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09 Sep 2004, 20:28
I will go for C. Uses Companies' rightly. Also Adverb 'richly' modifies the verb 'profiting'.

Last edited by venksune on 09 Sep 2004, 20:31, edited 1 time in total.
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09 Sep 2004, 20:34
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why 'with'? 'Using' instead of 'by using' was also more precise
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09 Sep 2004, 21:06
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venksune wrote:
why 'with'? 'Using' instead of 'by using' was also more precise

'Using' is not the offender. It can work interchangeably with 'with'. However, 'profiting' introduces the issue of parallelism. The investors are hoping for two things:

(i) Paying off their debt
(ii) Profiting richly

So while to pay off their debt is in the infinitive form, profiting is not.

Compare the following two:

(1) Using this plan, I'm hoping to pay off my mortgage with my retirement income and to go on an extended vacation subsequently to the Canadian Rockies.
(2) Using this plan, I'm hoping to pay off my mortgage using my retirement income and going on an extended vacation subsequently to the Canadian Rockies.

The second one is too heavy with nested present participles. Also, to pay off is not parallel with going on.
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09 Sep 2004, 23:28
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Please look at the link below after you guys have sweated it out here..

Akamai speaketh... Problem Solveth

http://www.gmatclub.com/phpbb/viewtopic.php?t=210

Sincerely
Praetorian
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10 Sep 2004, 04:09
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Till the explaination my answer was C.
Thanks for the explaination Intr3pid
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10 Sep 2004, 05:30
OA is E, nice one intr3pid.
In a leveraged buyout, investors borrow huge sums of money to buy companies, hoping to pay off the debt with the companies' earnings and to profit richly by the later resale of the companies or their division

The portion in red is part of the independent clause. The blue part is an appositive phrase. It gives emphasis on why investors will buy those companies in question. The trickier part is that the appositive is immediately followed by the second part of the independent clause; hence, we need "to profit", infinitive form, to follow the parallelism established by "to buy companies". Of course, "companies" plural form is needed for parallelism.
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05 Jun 2008, 06:09
intr3pid wrote:
Paul wrote:
In a leveraged buyout, investors borrow huge sums of money to buy companies, hoping to pay off the debt by using the company's earnings and to profit richly by the later resale of the companies or their division.

A) by using the company's earnings and to profit
B) by using the companies' earnings and by profiting
C) using the companies' earnings and profiting
D) with the company's earnings, profiting
E) with the companies' earnings and to profit

First hint: mixed use of company and companies. Gotta make up your mind!

Second hint: LBO investors usually wait till they have paid off their debts using the earnings of the companies. Otherwise, there's no point of a buyout. (Granted, this hint will only be apparent to the finance folks.)

(B) is incorrect because you don't need to pay off your LBO debt by profiting richly. (C) introduces a qualifying present participle within a qualifying present participle (hoping...using...profiting). Similar problem with (D) which also forgets the conjunction AND.

(E) is the most concise of them all: hoping to pay off the debt ... and to profit richly. (It can lose the second to before profit though.)

The point that i dont understand here is that E uses the word "companies' "..i m sure i m missing something here
is companies' not a plural form (i mean i know i may just be called a stupid for asking this)

looking forward to a clear and a lil less complicated explanation to this problem
thanks
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05 Jun 2008, 13:03
vdhawan1 wrote:
intr3pid wrote:
Paul wrote:
In a leveraged buyout, investors borrow huge sums of money to buy companies, hoping to pay off the debt by using the company's earnings and to profit richly by the later resale of the companies or their division.

A) by using the company's earnings and to profit
B) by using the companies' earnings and by profiting
C) using the companies' earnings and profiting
D) with the company's earnings, profiting
E) with the companies' earnings and to profit

First hint: mixed use of company and companies. Gotta make up your mind!

Second hint: LBO investors usually wait till they have paid off their debts using the earnings of the companies. Otherwise, there's no point of a buyout. (Granted, this hint will only be apparent to the finance folks.)

(B) is incorrect because you don't need to pay off your LBO debt by profiting richly. (C) introduces a qualifying present participle within a qualifying present participle (hoping...using...profiting). Similar problem with (D) which also forgets the conjunction AND.

(E) is the most concise of them all: hoping to pay off the debt ... and to profit richly. (It can lose the second to before profit though.)

The point that i dont understand here is that E uses the word "companies' "..i m sure i m missing something here
is companies' not a plural form (i mean i know i may just be called a stupid for asking this)

looking forward to a clear and a lil less complicated explanation to this problem
thanks

Hi vdhawan1,

Note that in the non-underlined part, the investors are buying companies, so the underlined part must refer to these companies. Hence the plural form "companies' "
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